The following information is available for a company's cost of sales over the last five months. Using the high-low method, the estimated total fixed cost is:
A) $25,000.
B) $30,000.
C) $13,692.
D) $100,000.
E) $50,000.

Question

The following information is available for a company's cost of sales over the last five months.  Using the high-low method, the estimated total fixed cost is:
A) $25,000. 
B) $30,000. 
C) $13,692. 
D) $100,000. 
E) $50,000.

Quizplus · Accepted Answer

Variable cost per unit = Change in cost/change in units (using highest and lowest level of activity)
($61,000 − $31,000)/(2,400 − 400) = $15.00 per unit
Fixed cost = Total cost (high or low) − (variable cost per unit × hours (high or low)
$61,000 − ($15 × 2,400) = $25,000
OR $31,000 − ($15 × 400) = $25,000

The Following Information Is Available for a Company's Cost of Sales