Question

Collins Company had the following cost data available. The Collins accountant believes that direct labor hours is the correct cost driver to use to predict and manage these costs. $50,000; 15,000 direct labor hours for January $40,000; 12,000 direct labor hours for February $35,000; 10,000 direct labor hours for March $38,000; 11,000 direct labor hours for April $45,000; 12,500 direct labor hours for May $45,000; 14,000 direct labor hours for June Use the high-low method to compute the total amount of monthly fixed costs for Collins Company.

Answer 1

The total amount of monthly fixed costs for Collins Company is 5,000 dollars.

Step-by-step explanation:

This problem requires us to calculate the fixed cost using high low method. The detail calculation is given below.

Variable cost = ($ 50,000 -$ 35,000)/(15,000 - 10,000) = 3 per unit

Fixed Cost = 50,000 - (3*15000) = 5,000 dollars or

Fixed cost = 35,000 - (3 * 10,000) = 5,000 dollars