Question

Walton Boat Company makes inexpensive aluminum fishing boats. Production is seasonal, with considerable activity occurring in the spring and summer. Sales and production tend to decline in the fall and winter months. During year 2, the high point in activity occurred in June when it produced 207 boats at a total cost of $153,160. The low point in production occurred in January when it produced 38 boats at a total cost of $45,000. Required Use the high-low method to estimate the amount of fixed cost incurred each month by Walton Boat Company. Determine the total estimated cost if 200 boats are made.

Answer 1

Total estimated cost $148,680

Fixed cost $20,680

Step-by-step explanation:

Using the high-low method to estimate the amount of fixed cost that is incurred each month

Units Cost

High 207 153,160

LOW 38 45,000

Difference 169 108,160

Variable cost per unit= 108,160/169

Variable cost per unit= 640

Fixed cost = 153,160-207*640

Fixed cost = 20,680

Total estimated cost= 200*640+20,680

Total estimated cost=128,000+20,680

Total estimated cost=148,680

Therefore Total estimated cost will be $148,680 and Fixed cost will be $20,680