Frazier Manufacturing Company collected the following production data for the past month: $$\begin{array} { c c c }
\text { Units Produced } & & \text { Total Cost } \
1,600 & & \$ 66,000 \
1,300 & & 57,000 \
1,500 & & 67,500 \
1,100 & & 49,500
\end{array}$$ If the high-low method is used what is the monthly total cost equation?

Question

Frazier Manufacturing Company collected the following production data for the past month: $$\begin{array} { c c c } 
\text { Units Produced } & & \text { Total Cost } \
 1,600 & & \$ 66,000 \
1,300 & & 57,000 \
1,500 & & 67,500 \
1,100 & & 49,500
\end{array}$$ If the high-low method is used what is the monthly total cost equation?

Quizplus · Accepted Answer

The high-low method is used to estimate the fixed and variable costs of a company. The fixed costs are the costs that do not change with the level of production, while the variable costs are the costs that do change with the level of production.To use the high-low method, we first need to find the highest and lowest levels of production and the corresponding total costs. In this case, the highest level of production is 1,600 units and the corresponding total cost is $66,000. The lowest level of production is 1,100 units and the corresponding total cost is $49,500.Next, we need to calculate the variable cost per unit. This is done by dividing the difference between the total costs at the highest and lowest levels of production by the difference between the corresponding levels of production. In this case, the variable cost per unit is ($66,000 - $49,500) / (1,600 - 1,100) = $33.Finally, we need to calculate the fixed cost. This is done by subtracting the variable cost per unit from the total cost at any level of production. In this case, the fixed cost is $66,000 - ($33 * 1,600) = $13,200.Therefore, the monthly total cost equation is Total cost = $13,200 + $33/unit.

Frazier Manufacturing Company Collected the Following Production Data for the Past