Shatnar Inc. has decided to use the high-low method to estimate the total cost a

Question

Shatnar Inc. has decided to use the high-low method to estimate the total cost and the fixed and variable cost component of the total cost. The data for various levels of production are Determine the variable cost per unit and the total fixed cost Based on part (a), estimate the total cost for 3, 300 units of production Divide the difference the highest and lowest total costs by the difference between the highest and lowest production units. Multiply the variable unit cost by the number for a month. Subtract this variable cost from the month's total cost to arrive at the fixed cost. The resulting amount should be the same for either the highest or lowest production

Explanation / Answer

High low method:-

Variable cost per unit = Total cost(high activity) - Total cost(low activity

     Unit produced(high activity)-Unit produced(low activity)

= 616000-396000/6820-2420

= $50 Per unit

Fixed Cost:-

4340 units = 455400 - (4340x50) = $238400

2420 units = 396000 - (2420x50) = $275000

6820 units = 616000 - (6820x50) = $275000

B.Total Cost for 3300 Units =

Variable Cost = 3300x 50 = $165000

Fixed Cost = $275000

Total Cost = $440000

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.