The following data pertain to activity and costs for two recent months: Assuming that these activity levels are within the relevant range,the mixed costs for November were?
A) $20,000.
B) $25,000.
C) $30,000.
D) $40,000.

Question

The following data pertain to activity and costs for two recent months:  Assuming that these activity levels are within the relevant range,the mixed costs for November were?
A) $20,000. 
B) $25,000. 
C) $30,000. 
D) $40,000.

Quizplus · Accepted Answer

To determine the mixed costs, we need to separate the fixed costs and variable costs. We can use the high-low method to do this.

Using the high-low method:
Variable cost per unit = change in cost / change in activity level
= (35,000 - 25,000) / (5,000 - 4,000) = $10 per unit

Fixed costs = Total costs - (Variable costs per unit x Total activity level)
= 35,000 - (10 x 5,000) = $20,000

Therefore, the mixed costs for November were $20,000 + (10 x 4,500) = $25,000. The mixed costs for the other month are not relevant to this question.

The Following Data Pertain to Activity and Costs for Two