Question

Please show all work

ziegler Inc. has decided to use the high-low method to estimate the total cost and the fixed and variable cost components of the total cost. The data for various levels of production are as follows:

Units Produced			Total Costs
80,000			$25,100,000
92,000			27,206,000
120,000			32,120,000

a. Determine the variable cost per unit and the total fixed cost.

Variable cost (Round to two decimal places.)	$ per unit
Total fixed cost	$

b. Based on part (a), estimate the total cost for 115,000 units of production.

Total cost for 115,000 units

$

Answer 1

QUESTION NO 1.

VARIABLE COST PER UNIT AS PER HIGH LOW METHOD = HIGHEST ACTIVITY COST - LOWER ACTIVITY COST / HIGHEST UNITS PRODUCED - LOWER UNIT PRODUCED.

AS PER GIVEN DATA

HIGHEST ACTIVITY COST = 32,120,000

LOWEST ACTIVITY COST = 25,100,000

HIGHEST UNITS PRODUCED = 120,000

LOWEST UNITS PRODUCED = 80,000

SO VARIABLE COST PER UNIT = 32,120,000 - 25,100,000 / 120,000- 80,000

= $ 175.50

NOW FIXED COSTS = HIGHEST ACTIVITY COSTS -(VARIABLE COST PER UNIT * HIGHEST UNITS PRODUCED )

= 32,120,000 - (175.50* 120,000)

=32,120,000 - 21,060,000

=$ 11,060,000

HENCE VARIABLE COST PER UNIT = $ 175.50 AND FIXED COSTS = $ 11,060,000

QUESTION NO 2

TOTAL COST FOR PRODUCING 115,000 UNITS OF PRODUCTION AS PER ABOVE

TOTAL COSTS = FIXED COSTS +( VARABLE COST * NO OF UNITS)

= 11,060,000 + ( 175.50 * 115,000 )

= 11,060,000 + 20,182,500

= $ 31,242,500

HENCE TOTAL COST OF PRODUCING 115,000 UNITS = $ 31,242,500.