Question

The manufacturing cost of Calico Industries for three months of the year are provided below: Total Cost Production (units) April $119,300 279,500 May 91,200 164,700 June 108,300 247,800 Using the high-low method, the variable cost per unit and the total fixed costs are:

Answer 1

Variable cost per unit = 0.24

Total Fixed cost = $52,220

Step-by-step explanation:

The computation of the variable cost per unit and the total fixed costs is given below:-

Variable cost per unit = (April total cost of May - Production units of May) ÷ (April total cost of June - Production units of June)

= ($119,300 - 91,200) ÷ ($279,500 - 164,700)

= $28,100 ÷ $114,800

= $0.24

Total Fixed cost = (April total cost of May - (April total cost of June × Variable cost per unit)

= $119,300 - ($279,500 × 0.24)

= $119,300 - $67,080

= $52,220