Question

Cullumber Corp. has collected the following data concerning its maintenance costs for the past 6 months....

Cullumber Corp. has collected the following data concerning its maintenance costs for the past 6 months.

Units Produced

Total Cost

July

 20,190 $44,085

August

 35,904 53,856

September

 40,392 61,710

October

 24,684 47,358

November

 44,880 83,589

December

 42,636 69,564

(a1)

Compute the variable cost per unit using the high-low method. (Round answer to 2 decimal places, e.g. 2.25.)

Variable cost per unit

  

(a2)

Compute the fixed cost elements using the high-low method.

Fixed costs
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Homework Answers

Answer #1

(a1)

Variable cost per unit $1.6 per unit

Explanation:-

Variable cost per unit = (Highest activity cost - lowest activity cost) / (Highest activity units - lowest activity units)
Variable cost per unit = (November activity cost - July activity cost)/ (November activity units - july activity units)
Variable cost per unit = ($83,589 - $44,085)/(44,880 - 20,190)
Variable cost per unit =$39,504/ $24,690
Variable cost per unit = $1.6

(a2)

Fixed cost $11,781

Explanation:-

Fixed cost = Lowest activity cost - (Variable cost per unit × Lowest activity units)
Fixed cost = $44,085 - (20,190 × $1.6)
Fixed cost = $44,085 - $32,304
Fixed cost = $11,781
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