Required: A. Use the high/low method to calculate the variable cost per unit and

Question

Required:

A.  Use the high/low method to calculate the variable cost per unit and fixed costs for PG Phones.

B.  What are estimated total costs for production of 13,000 cell phones?
$

Variable cost per unit $ per phone Fixed cost $ PG Phones accumulated the following production and overhead cost data for the past five months related to its production of cell phones: Round your answers to the nearest cent, when neccessary. Use the high/low method to calculate the variable cost per unit and fixed costs for PG Phones What are estimated total costs for production of 13,000 cell phones?

Explanation / Answer

Hi,

Please find the answer as follows:

Part A:

Variable Cost Per Unit = (Overhead Cost at Highest Levels of Activity - Overhead Cost at Lowest Levels of Activity)/(Highest Activity Level - Lowest Activity Level) = (35940 - 29500)/(14300 - 11500) = $ 2.3 Per Phone

Fixed Cost = 35940 - 14300*2.3 = 3050

Part B:

Total Estimated Costs of 13000 cell phones = 13000*Variable Cost Per Unit + Fixed Cost = 13000*2.3 + 3050 = 32950

Thanks.

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