Question

# Calculator High-Low Method The manufacturing costs of Alex Industries for three months of the year are...

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High-Low Method

The manufacturing costs of Alex Industries for three months of the year are provided below.

 Total Costs Production January \$428,040 2,255 units February 665,840 6,355 March 568,820 4,220

Using the high-low method, determine (a) the variable cost per unit and (b) the total fixed cost. Round all answers to the nearest whole dollar.

 a. Variable cost per unit \$ b. Total fixed cost \$

Contribution Margin

Sally Company sells 22,000 units at \$18 per unit. Variable costs are \$10.8 per unit, and fixed costs are \$63,400.

Determine (a) the contribution margin ratio, (b) the unit contribution margin, and (c) income from operations.

 a. Contribution margin ratio (Enter as a whole number.) % b. Unit contribution margin (Round to the nearest cent.) \$ per unit c. Income from operations \$

High low method

variable cost per unit = maximum cost - minimum cost / maximum unit - minimum unit

= 665,840 - 428,040 / 6,355 - 2,255

= 237,800 - 4,100

= 58 per unit

fixed cost = total cost - variable cost

= 665,840 - (6,355 x 58)

= 665,840 - 368,590

= 297,250

Requirement a.

contribution margin ratio = contribution margin / sale x 100

= 158,400 / 396,000 x 100

= 40%

contribution margin = sale - variable cost

= (22,000 x 18) - (22,000 x 10.8)

= 158,400

Requirement b.

unit contribution margin = per unit selling price - per unit variable cost

= 18 - 10.8

= 7.2 per unit

Requirement c.

 sale (22,000 x 18) 396,000 Less: variable cost (22,000 x 10.8) 237,600 contribution 158,400 Less: Fixed cost 63,400 income from operation 95,000

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