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A stapler manufacturer has the following information available: Units Produced Manufacturing Costs Quarter 1 15,000 $...

A stapler manufacturer has the following information available:

Units Produced

Manufacturing Costs

Quarter 1

15,000

$ 88,000

Quarter 2

20,000

$ 120,000

Quarter 3

18,000

$ 115,000

Quarter 4

10,000

$ 69,700

What do you estimate the total variable costs to be for Quarter 3 using the high-low method?

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Homework Answers

Answer #1

High-Low Method :

Variable cost Per Units

= ( Difference in cost between High and low Activity) / ( Difference in Units between High-low)

High level of Activity = 20,000 Unit

Low Level of activity = 10,000 Units

Variable Cost Per Unit = (120,000-67,900) / (20,000-10,000)

= 50,300 / 10,000 = 5.03 Per Unit

Total Variable cost Estimated for Quarter 3 = Units in Quarter 3 * Varaible cost Per unit

= 18,000 *5.03 = 90,540

Answer : Total Variable cost At Quarter 3 = $ 90,540

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