Question

Baker Company produced 1,500 units in May at a total cost of $10,000 and 4,000 units in June at a total cost of $18,000. Compute the variable cost per unit and the total fixed cost using the high-low method.

Answer 1

Variable cost per unit = 3.2

TFC = 5200

Step-by-step explanation:

Below is the given values:

Unit of may = 1500 units

Total cost of may = $10000

Unit of June = 4000

Total cost of June = $18000

Use below formula to find the variable cost per unit:

Variable cost per unit = (Tota cost of high activity - Total cost of low activity) / (High activity unit - lowest activity unit)

Variable cost per unit = (18000 - 10000) / (4000 - 1500)

Variable cost per unit = 3.2

Total Cost=(VC×Units Produced)+Total Fixed Cost

18000 = (3.2 x 4000) + TFC

Total fixed cost = 18000 - (3.2 x 4000)

Total fixed cost = $5200