Glascro Company manufactures skis.The management accountant wants to calculate the fixed and variable costs associated with the leasing of machinery.Data for the past four months were collected as follows:

- Using the high-low method, calculate the fixed cost of leasing.

A) $2,000
B) $1,500
C) $2,500
D) $1,000

Question

Glascro Company manufactures skis.The management accountant wants to calculate the fixed and variable costs associated with the leasing of machinery.Data for the past four months were collected as follows:

- Using the high-low method, calculate the fixed cost of leasing.

-  Using the high-low method, calculate the fixed cost of leasing.
 
A) $2,000 
B) $1,500 
C) $2,500 
D) $1,000

Quizplus · Accepted Answer

Variable Rate = (High Point Cost - Low Point Cost) / (High Point Output - Low Point Output)
= ($16,000 - $10,000) / (1,000 - 600) = $15
 Fixed Cost = Total Cost at High Point - (Variable Rate × Output at High Point)
Fixed cost = $16,000 - ($15 × 1,000) = $1,000
OR
Fixed cost = $10,000 - ($15 × 600) = $1,000

Glascro Company Manufactures Skis