Arlington Company's highest point of total cost was $61 875 in June. Their point of lowest cost was $52 250 in December. The company makes a single product. Production volume in June was 12 500 units; production volume in December was 7 000 units. How much is the fixed cost per month?

Question

Quizplus · Accepted Answer

The fixed cost can be calculated using the high-low method. The variable cost per unit is ($61,875 - $52,250) / (12,500 - 7,000) = $1.90. The fixed cost is then calculated by subtracting the total variable cost at either the high or low point from the total cost. Using the high point: $61,875 - ($1.90 * 12,500) = $40,000.

Arlington Company's Highest Point of Total Cost Was $61 875