The Stamford Times has determined that the annual printing of 900,000 newspapers

Question

The Stamford Times has determined that the annual printing of 900,000 newspapers costs 14 cents per copy. If production were to be increased to 1,500,000 copies per year, the per-unit cost would drop to 9 cents per copy.
Using the high-low method, determine the total fixed and variable costs of printing 900,000 newspapers.
Total fixed costs $ 112500
Total variable costs $ 13500

Using the fixed and variable costs you determined in part (1), what would be the total cost of producing 1,000,000 copies?
$

Explanation / Answer

Total fixed cost will be the same... i.e. $112,500 variable cost per unit = $13,500/1,500,000 = $0.009 = 0.9 cents per copy So Total cost of producing 1,000,000 copies... = fixed cost + variable cost = $112,500 + $0.009*1,000,000 = $121,500 Hence the total cost of producing 1,000,000 copies is $121,500

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