Question

A department of Alpha Co. incurred the following costs for the month of September. Variable costs, and the variable portion of mixed costs, are a function of the number of units of activity:

Activity level in units		5,000
Variable costs	$	9,750
Fixed costs		28,000
Mixed costs		21,830
Total costs	$	59,580

During October the activity level was 8,600 units, and the total costs incurred were $68,500.

Required:

a. Calculate the variable costs, fixed costs, and mixed costs incurred during October.

	October
Variable cost
Fixed cost
Mixed cost

b. Use the high–low method to calculate the cost formula for mixed cost.

Cost formula

+

per unit

Answer 1

a.

variable cost	16,770
fixed cost	28,000
mixed cost	23,730
total cost	68,500

woking:

variable = $9750 september activity / 5000 units *8600

=>$16,770.

fixed cost will be same for all the months.

mixed cost = total cost -variable cost -fixed cost

=>68,500-16,770-28,000

=>23,730.

b.

cost formula

19,191 + 0.53 per unit

working

variable portion=: (october mixed cost - september mixed cost) / ((october units - september units)

=>(23,730-21,830) / (8600-5000 units)

=>1900 / /3600 units

=>0.527777 per unit

fixed portion calculation:

consider october:

8600 units

variable portion = 8600*0.527777=>4,539

fixed portion = 23,730 - 4539

=>19,191.