Problem 2-20 (Part Level Submission) The Aust Corporation has gathered the follo
ID: 2410626 • Letter: P
Question
Problem 2-20 (Part Level Submission)
The Aust Corporation has gathered the following data on its copy machine costs for the first eight months of the year.
Month
Number of Copies
Total Copy Cost
January
40,000
$ 3,500
February
35,000
$ 3,200
March
60,000
$ 4,100
April
80,000
$ 5,100
May
85,000
$ 5,600
June
75,000
$ 4,800
July
82,000
$ 5,300
August
105,000
$ 6,000
Using the high-low method, what is the fixed cost per month?
Month
Number of Copies
Total Copy Cost
January
40,000
$ 3,500
February
35,000
$ 3,200
March
60,000
$ 4,100
April
80,000
$ 5,100
May
85,000
$ 5,600
June
75,000
$ 4,800
July
82,000
$ 5,300
August
105,000
$ 6,000
Explanation / Answer
Answer:
fixed cost per month=$1800
Working notes for the above answer is as under
First we need to find out the variable cost as per High low method as under
Variable cost
= High cost- low Cost / High production -Low production
=6000-3200 / 105,000- 35,000
=2800 /70,000
=0.04 per copy variable cost
Now we will find fixed cost as under
Fixed cost
=Total Cost- Variable cost
Fixed cost for month of august
=6000- (105,000*0.04)
=6000-4200
=$1800
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