Maxwell Company has a total expense per unit of $2.00 per unit at the 16,000 level of activity and total expense per unit of $1.95 at the 21,000 unit level of activity.
-The best estimate of the total expected costs at the 19,000 level of activity for Maxwell Company is:
A) $37,050
B) $38,000
C) $37,370
D) $39,830

Question

Quizplus · Accepted Answer

Using the high-low method:
Variable cost per unit = (Expense at High Level – Expense at Low Level) / (Units produced at High Level – Units produced at Low Level)
Variable cost per unit = ($1.95 - $2.00) / (21,000 - 16,000) = $0.01 per unit
Total fixed cost = Total Expense – Total Variable Cost
Total fixed cost = $2.00 x 16,000 = $32,000
Total cost at 19,000 units = Total fixed cost + Total variable cost
Total cost at 19,000 units = $32,000 + ($0.01 x 19,000) = $37,370

Maxwell Company Has a Total Expense Per Unit of $2