Question

The manufacturing costs of Rosenthal Industries for the first three months of the year follow: Total Costs Production January $207,360 1,080 units February 296,760 2,230 March 322,560 3,480 Using the high-low method, determine (a) the variable cost per unit and (b) the total fixed cost. a. Variable cost per unit $ b. Total fixed cost

Answer 1

a. $48

b. $155,520

Step-by-step explanation:

The computation of the fixed cost and the variable cost per hour by using high low method is shown below:

Variable cost per unit = (High total cost - low total cost) ÷ (High production - low production)

= ($322,560 - $207,360) ÷ (3,480 units - 1,080 units)

= $115,200 ÷ 2,400 units

= $48

Now the fixed cost equal to

= High total cost - (High production × Variable cost per unit)

= $322,560 - (3,480 units × $48)

= $322,560 - $167,040

= $155,520

We simply applied the above formulas