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
A) $0.78 per unit and $4,000
B) $0.40 per unit and $8,000
C) $4.00 per unit and $800
D) $7.80 per unit and $4,000

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
A) $0.78 per unit and $4,000 
B) $0.40 per unit and $8,000 
C) $4.00 per unit and $800 
D) $7.80 per unit and $4,000

Quizplus · Accepted Answer

Using the high-low method, we need to find the variable cost per unit and the total fixed costs.

From the data provided, we can identify the highest and lowest levels of activity and the associated costs:

Highest activity: 18,000 units with a cost of $12,200
Lowest activity: 6,000 units with a cost of $4,600

Using this information, we can calculate the variable cost per unit as follows:

Variable cost per unit = (High cost - Low cost) / (High activity - Low activity)
Variable cost per unit = ($12,200 - $4,600) / (18,000 units - 6,000 units)
Variable cost per unit = $7,600 / 12,000 units
Variable cost per unit = $0.63 per unit

Next, we can calculate the total fixed costs by using either the high or low activity level and the variable cost per unit:

Total fixed costs = Total cost - (Variable cost per unit x Number of units)
Total fixed costs = $12,200 - ($0.63 x 18,000)
Total fixed costs = $12,200 - $11,340
Total fixed costs = $8600

Therefore, the variable cost per unit is $0.63 and the total fixed costs are $8,600. None of the answer choices reflect these specific values, but answer choice B is the closest with a variable cost per unit of $0.40 and total fixed costs of $8,000.

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