The manufacturing cost of Calico Industries for three months of the year are provided below: Using the high-low method, the variable cost per unit and the total fixed costs are

Question

The manufacturing cost of Calico Industries for three months of the year are provided below:  Using the high-low method, the variable cost per unit and the total fixed costs are

Quizplus · Accepted Answer

Using the high-low method, we first need to calculate the variable cost per unit by taking the difference in total cost ($20,000 - $16,000) and dividing it by the difference in units produced (25,000 - 15,000).
Variable cost per unit = ($20,000 - $16,000) / (25,000 - 15,000) = $0.40 per unit

Next, we need to calculate the total fixed costs. We can use either the high or low data points to do this, so let's use the low point of 15,000 units produced and a total cost of $16,000.
Total cost = Variable cost per unit x Units produced + Total fixed costs
$16,000 = $0.40 x 15,000 + Total fixed costs
Total fixed costs = $8,000

Therefore, the variable cost per unit is $0.40 per unit and the total fixed costs are $8,000. The best choice is B.

The Manufacturing Cost of Calico Industries for Three Months of the Year