Question

7. In applying the high-low method, what is the fixed cost?

Month	Miles	Total Cost
January	70000	$92000
February	44000	80000
March	60000	88000
April	84000	120000

$12000

$36000

$32000

$8000

18. Variable costs for Sunland Company are 60% of sales. Its selling price is $75 per unit. If Sunland sells one unit more than break-even units, how much will profit increase?

$125

$30

$45

$90

Please answer both questions. Thank you!

Answer 1

7. In applying the high-low method, what is the fixed cost?

Answer: $36000

High point	84,000	120,000
Low point	44,000	80,000
Difference	40,000	40,000
Divide by:		/ 40,000
Variable cost		1

Fixed cost

= Total cost - Variable cost

= 120,000 - (84,000*1)

= 36,000

18. Variable costs for Sunland Company are 60% of sales. Its selling price is $75 per unit. If Sunland sells one unit more than break-even units, how much will profit increase?

Answer: $30

Increase in profit

= Selling price * Contribution margin ratio

= 75 * 40%

= 30