Frazier Manufacturing Company collected the following production data for the past month: $\begin{array}{rr}\text { Units Produced }&\text { Total Cost }\
1,600 & \$ 66,000 \
1,300 & 57,000 \
1,500 & 67,500 \
1,100 & 49,500
\end{array}$ If the high-low method is used, what is the monthly total cost equation?
A)Total cost = $13,200 + $33/unit
B)Total cost = $16,500 + $30/unit
C)Total cost = $0 + $45/unit
D)Total cost = $9,900 + $36/unit

Question

Quizplus · Accepted Answer

The high-low method calculates the variable cost per unit by dividing the difference in total cost between the highest and lowest production levels by the difference in units produced between those levels. The fixed cost is then calculated by subtracting the variable cost per unit from the total cost at either the highest or lowest production level.In this case, the difference in total cost between the highest and lowest production levels is $67,500 - $49,500 = $18,000. The difference in units produced between those levels is 1,600 - 1,100 = 500 units. Therefore, the variable cost per unit is $18,000 / 500 units = $36.The fixed cost is then calculated by subtracting the variable cost per unit from the total cost at either the highest or lowest production level. Using the highest production level, the fixed cost is $67,500 - (36 * 1,600) = $13,200.Therefore, the monthly total cost equation is Total cost = $13,200 + $36/unit.

Frazier Manufacturing Company Collected the Following Production Data for the Past