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Connect Ew Hi re I https://newconnect.mheducation.com/flow/connect.html Help Save & Exit Submit Exercise 2-16A Estimating fixed and variable costs using the high-low method LO 2-6 ith considerable actirvity occurring in the tend to decline in the fall and winter months, During ae when it produced 35 occurred in January when it produced 35 Rundie Boat Company makes inexpensive aluminum fishing boats. Production is seasonal. w in June when it produced 2 boats at a total cost of $47.oo0. Required a Use the high-low method to estimate the amount of fixed cost incurred each r months. During 2019, the high point in activity occurred Month by Rundle Boat Company b. Determine the total estimated cost if 160 boats are made.

Explanation / Answer

a. Variable Cost / unit = Change in Cost / Change in Volume = $ ( 167,060 - 47,000) / ( 209 - 35) = $ 120,060 / 174 = $ 690 per unit.

Fixed Cost = $ 167,060 - $ ( 690 x 209) = $ 22,850

b. Total estimated cost to make 160 boats = 160 x $ 690 + $ 22,850 = $ 133,250.

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