Separating mixed cost using the high-low method. The following information perta

Question

Separating mixed cost using the high-low method.
The following information pertains to Jacobs incorporated:
2008 information: Sales. $2,300,000 Selling expense. 347,000

2009 Information: Sales. $2,860,000 Selling expense 369,400
Using the high-low method, determine the following: A. The variable cost element for selling expense B. The fixed selling expense C. The selling expense that can be expected if sales are $2,500,000. Separating mixed cost using the high-low method.
The following information pertains to Jacobs incorporated:
2008 information: Sales. $2,300,000 Selling expense. 347,000

2009 Information: Sales. $2,860,000 Selling expense 369,400
Using the high-low method, determine the following: A. The variable cost element for selling expense B. The fixed selling expense C. The selling expense that can be expected if sales are $2,500,000. Separating mixed cost using the high-low method.

2008 information: Sales. $2,300,000 Selling expense. 347,000

2009 Information: Sales. $2,860,000 Selling expense 369,400
Using the high-low method, determine the following: A. The variable cost element for selling expense B. The fixed selling expense C. The selling expense that can be expected if sales are $2,500,000.

Explanation / Answer

Variable cost per $ of sales is = Changes in cot/changes in sales

= (369400-347000)/(2860000-2300000)

= 0.04

A. variable cost eliment for selling expenses = variable cost per $ * total sales in $

Hence variable cost in 2008 = 0.04 * 2300000

= $92000

variable cost in 2009 = 0.04 * 2860000

= $114400

B. fixed selling expenses = Total selling expenses - variable selling expesnses

2008 = 347000 - 92000

= 255000

2009 = 369400 - 114400

= 255000

C. The selling expense that can be expected if sales are $2,500,000. = $355000

variable expenses = 0.04 * 2500000 = 100000

Fixed expenses = 255000

Total = 355000

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