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X Company's accountant uses the high-low method to determine the parameters of the company's monthly overhead...

X Company's accountant uses the high-low method to determine the parameters of the company's monthly overhead cost function, with units produced as the independent variable. She has the following past monthly observations to work with:

Units Produced Cost
6500 30882
8900 36714
6900 31932
7600 34990
8600 35714
7900 34664

X Company estimates that 9,300 units will be produced in July. What are estimated fixed overhead costs for July [round variable costs per unit to two decimal places]?

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Answer #1

Highest activity cost = $36,714

Lowest activity cost = $30,882

Highest activity = 8,900

Lowest activity = 6,500

Variable cost per unit = (Highest activity cost - Lowest activity cost)/(Highest activity - Lowest activity)

= (36,714-30,882)/(8,900-6,500)

= 5,832/2,400

= $2.43 per unit

Fixed cost = Highest activity cost - Highest activity x Variable cost per unit

= 36,714- 8,900 x 2.43

= 36,714-21,627

= $15,087

estimated fixed overhead costs for July = $15,087

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