1- Simon Company\'s high and low level of activity last year was 60,000 units of
ID: 2390381 • Letter: 1
Question
1- Simon Company's high and low level of activity last year was 60,000 units of product produced in May and 20,000 units produced in November. Machine maintenance costs were $52,000 in May and $20,000 in November. Using the high-low method, determine an estimate of total maintenance cost for a month in which production is expected to be 45,000 units.$45,000
$40,000
$48,000
$39,000
2- In applying the high-low method, which months are relevant?
Month Miles Total Cost
January 80,000 $96,000
February 50,000 80,000
March 70,000 94,000
April 90,000 130,000
January and February
January and April
February and April
February and March
3-In applying the high-low method, what is the unit variable cost?
Month Miles Total Cost
January 80,000 $96,000
February 50,000 80,000
March 70,000 94,000
April 90,000 140,000
$1.44
$1.50
Cannot be determined from the information given
$1.60
4-In applying the high-low method, what is the fixed cost?
Month Miles Total Cost
January 80,000 $144,000
February 50,000 120,000
March 70,000 141,000
April 90,000 195,000
$26,250
$54,000
$75,000
$21,000
Explanation / Answer
(1) variable cost=change in cost/change in production 52000-20000/60000-20000=32000/40000=0.8 per unit variable cost=60000*0.8=$48000 total cost=52000 fixed cost=52000-48000=4000 cost of 45000 units=45000*0.8+4000=$40000 (2)February and April (3)unit variable cost=140000-80000/90000-50000=60000/40000=$1.5 (4)variable cost=195000-120000/90000-50000=75000/40000=$1.875 total variable cost=90000*1.875=168750 total cost=195000 fixed cost=195000-168750=$26250
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