Chapter 5 Exercise 1 1. High-low method The following cost data pertain to 19X6

Question

Chapter 5 Exercise 1 1. High-low method The following cost data pertain to 19X6 operations of Heritage Products: Quarter 1 Quarter 2 Quarter 3 Quarter 4 Shipping costs $58,200 $58,620 $60,125 $59,400 Orders shipped 120 140 175 150 The company uses the high-low method to analyze costs. a. Determine the variable cost per order shipped. b. Determine the fixed shipping costs per quarter. c. If present cost behavior patterns continue, determine total shipping costs for 19X7 if activity amounts to 570 orders.

Explanation / Answer

highest cost = 60125 lowest cost = 58200 highest order = 175 lowest order = 120 a.) variable cost per order shipped = (60125-58200)/(175-120) = 35$/unit b.) fixed shipping cost = 601250- 35*175 = 54000 c.) total cost = 54000 + 35*570 = 73950

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