Question

The following information is available for a company's cost of sales over the last four months.Month Units sold Cost of salesJanuary 400 $ 31,000February 800 $ 37,000March 1,600 $ 49,000April 2,400 $ 61,000Using the high-low method, the estimated total fixed cost is:A. $25,000.B. $30,000.C. $13,692.D. $100,000.E. $50,000.

Answer 1

Fixed costs= $25,000

Step-by-step explanation:

Giving the following information:

January 400 $ 31,000

February 800 $ 37,000

March 1,600 $ 49,000

April 2,400 $ 61,000

To calculate the fixed costs, first, we need to determine the unitary variable cost:

Variable cost per unit= (Highest activity cost - Lowest activity cost)/ (Highest activity units - Lowest activity units)

Variable cost per unit= (61,000 - 31,000) / (2,400 - 4,000)

Variable cost per unit= $15

Now, we can calculate the fixed costs:

Fixed costs= Highest activity cost - (Variable cost per unit * HAU)

Fixed costs= 61,000 - (15*2,400)

Fixed costs= $25,000

Fixed costs= LAC - (Variable cost per unit* LAU)

Fixed costs= 31,000 - (15*400)

Fixed costs= $25,000