The following information is available for electricity costs for the last six months of the year:
$$\begin{array} { l c c }
\text { Month } & \text { Production Volume } & \text { Electricity Costs } \
\hline\text { July } & 1,400 & \$ 2,200 \
\text { August } & 2,800 & 5,400 \
\text { September } & 3,200 & 5,700 \
\text { October } & 1,750 & 3,900 \
\text { November } & 1,200 & 2,400 \
\text { December } & 2,100 & 4.050
\end{array}$$
-Refer to the figure.What are the fixed costs?
A)$100
B)$200
C)$420
D)$5,400

Question

The following information is available for electricity costs for the last six months of the year:
$$\begin{array} { l c c } 
\text { Month } & \text { Production Volume } & \text { Electricity Costs } \
\hline\text { July } & 1,400 & \$ 2,200 \
\text { August } & 2,800 & 5,400 \
\text { September } & 3,200 & 5,700 \
\text { October } & 1,750 & 3,900 \
\text { November } & 1,200 & 2,400 \
\text { December } & 2,100 & 4.050
\end{array}$$
-Refer to the figure.What are the fixed costs?
A)$100
B)$200
C)$420
D)$5,400

Quizplus · Accepted Answer

To find the fixed costs, we can use the high-low method. First, identify the months with the highest and lowest production volumes: September (3,200 units) and November (1,200 units), respectively. Then, calculate the variable cost per unit: $(\$5,700 - \$2,400) / (3,200 - 1,200) = \$3,300 / 2,000 = \$1.65$ per unit. Next, calculate the fixed costs by subtracting the total variable costs at either level from the total costs at that level. Using November's data: $\$2,400 - (1,200 \times \$1.65) = \$2,400 - \$1,980 = \$420$.

The Following Information Is Available for Electricity Costs for the Last