Question

-Low Method
The manufacturing costs of Ackerman Industries for the first three months of the year follow:
 Total CostsUnits ProducedJanuary$211,510 1,710 units February150,480 950 March234,080 2,850 
Using the high-low method, determine (a) the variable cost per unit and (b) the totalfixed cost. Round all answers to the nearest whole dollar.
a.  Variable cost per unit$b.  Total fixed cost

Answer 1

Month	total cost	units
January	$211510	1710
February	$150480	950
March	$234080	2850

Answer = variable cost = $44

Fixed cost = $108680

Therefore maximum cost and units are in march with cost $234080 and 2850 units

And lowest are in february with cost $150480 and 950 units

Using high low method,

Variable cost = (Total cost of high activity – Total cost low activity) / (Highest activity unit – Lowest activity unit)
= (234080-150480)/(2850-950)

= 83600/1900

= $44 per unit

Now, calculation for fixed cost:

Total cost = variable cost + fixed cost

Total cost of march = 234080

Hence fixed cost = 234080 - (44 × 2850)

= 108680

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