Question

The manufacturing cost of Sunrise Industries for three months of the year are provided below:

	Total Cost	Production
April	$ 63,000	900 units
May	80,920	1,600 units
June	100,300	2,400 units

            Using the high-low method, determine the (a) variable cost per unit, and (b) the total fixed costs (c) what is the purpose of using the high-low method?        

All work must be shown for credit   

Please label your answers as (a), (b), and (c)

Answer 1

A) Variable cost per unit

= (Cost at highest production activity-Cost at lowest production activity) / (Highest activity-Lowest activity)

= (100,300-63,000)/(2400-900)

= 37300/1500

=24.87 (rounded)

B) Total fixed cost

=100300-2400(24.87)

=$40,612

C) High-low method is a method used by managerial accountants that aims at seperating variable and total fixed cost with the given limited data.

(This problem involves rounding off of numbers. Please comment if you face any issues)