Question

Hardigree Insurance has collected the following information over the last six months. Month Units produced Total...

Hardigree Insurance has collected the following information over the last six months.

Month Units produced Total costs

March 2,000 $6,700

April 3,200 9,400

May 2,200 7,100

June 3,000 9,500

July 2,800 8,000

August 2,100 6,600

Using the high-low method, how much is the total fixed cost?

$2,200

$7,910

$2,300

$4,400

Business   Accounting   
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Answer #1

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Month Units Cost
Highest Activity (Units) April 3200 9400
Lowest Activity (Units) March 2000 6700
Variable Cost=(Total Cost of High-Total Cost of Low)/(Highest Activity-Lowest Activity)
Variable Cost=(9400-6700)/(3200-2000)
Variable Cost=2.25 Per Unit
Fixed Cost:
Total Cost=(Variable Cost per Unit*Units)+Fixed Cost
9400=(2.25*3200)+Fixed Cost
Fixed Cost=9400-7200
Fixed Cost=2200
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