Question

Inspection costs at one of Ratulowski Corporation's factories are listed below: Units ProducedInspection Costs April 918 $17,512 May 975 $17,900 June 924 $17,565 July 908 $17,410 August 930 $17,594 September 915 $17,480 October 932 $17,632 November 872 $16,930 December 911 $17,438 Management believes that inspection cost is a mixed cost that depends on units produced. Using the high-low method, the estimate of the fixed component of inspection cost per month is closest to: (Round your intermediate calculations to 2 decimal places.)

Answer 1

$8,717.94

Step-by-step explanation:

Using the high-low method

Variable unit cost = ($17,900 - $16,930) / (975 - 872)

Variable unit cost = $970 / 103

Variable unit cost = $9.4175

Fixed component of inspection cost per month = $17,900 - (975 * $9.4175) = $17,900 - $9182.0625 = $8717.9375 = $8,717.94

So, using the high-low method, the estimate of the fixed component of inspection cost per month is closest to $8,717.94