Answer:
Variable cost per unit= $1.75
Fixed costs= $4,500
Explanation:
Giving the following information:
Units Produced Total Cost
July 18,000 $36,000
August 32,000 48,000
September 36,000 55,000
October 22,000 38,000
November 40,000 74,500
December 38,000 62,000
To calculate the variable and fixed costs under the high-low method, we need to use the following formulas:
Variable cost per unit= (Highest activity cost - Lowest activity cost)/ (Highest activity units - Lowest activity units)
Variable cost per unit= (74,500 - 36,000) / (40,000 - 18,000)
Variable cost per unit= $1.75
Fixed costs= Highest activity cost - (Variable cost per unit * HAU)
Fixed costs= 74,500 - (1.75*40,000)
Fixed costs= $4,500
Fixed costs= LAC - (Variable cost per unit* LAU)
Fixed costs= 36,000 - (1.75*18,000)
Fixed costs= $4,500
