Anthony Company's highest point of total cost was $75,000 in June. Their point of lowest cost was $50,000 in December. The company makes a single product. Production volume in June and December were 13,000 and 8,000 units, respectively. What is the fixed cost per month?

Question

Quizplus · Accepted Answer

Using the high-low method, we can calculate the variable cost per unit as (Total cost at high point – Total cost at low point) / (Production volume at high point – Production volume at low point):
Variable cost per unit = ($75,000 – $50,000) / (13,000 – 8,000) = $5 per unit

Then, we can use either the high or low point to calculate the fixed cost:
Fixed cost = Total cost – (Variable cost per unit * Production volume)
Fixed cost = $75,000 – ($5 * 13,000) = $10,000 per month (using high point)
Fixed cost = $50,000 – ($5 * 8,000) = $10,000 per month (using low point)

Therefore, the fixed cost per month is $10,000. The answer is C.

Anthony Company's Highest Point of Total Cost Was $75,000 in June