3. High-low method The following cost data pertain to 20X6 operations of Heritag
ID: 2498307 • Letter: 3
Question
3. High-low method
The following cost data pertain to 20X6 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 20X7 if activity amounts to 570 orders.
Explanation / Answer
Solution:
Highest Orders 175 Cost with highest orders 60,125 Lowest orders 120 Cost with Lowest orders 58,200 a. Variable cost = (highest cost - lowest cost)/ Highest orders- lowest orders) (60,125-58,200) / (175-120) Variable cost = 35 b. Fixed cost = Total cost - Variable cost Total cost for 120 orders 58,200 Less: Variable cost - $ 35 per order 4,200 Fixed cost= 54,000 c. Total cost for 570 orders Variable cost - $ 35 * 570 19,950 Fixed cost 54,000 Total cost 73,950Related Questions
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