High Low Mcthod Ziegler Inc. has decided to use the high-low method to estmate t

Question

High Low Mcthod Ziegler Inc. has decided to use the high-low method to estmate the total cost and the fixed and vartabie cost components of the total cost. The data for various kevels of production are as folows Units Produced Total Costs 990 $71,200 74,590 3,190 a. Determine the varrable cost per unit and the total fxed cost. Variabie cost: Round to the nearest dollar.) Total fxed cost: b. Boscd on part (a), cstimate the totol cost for 1,500 units of production, Total cost for 1,500 units: 1.X X per ur 105,233.X Check By Work ce betwee resuting amount shoulc be the same for elther the nighest or lowest production level.

Explanation / Answer

Cost at highest level of activity            1,10,880.00 Cost at Lowest level of activity               71,280.00 Highest level of activity                  3,190.00 Lowest Level of activity                     990.00 Variable cost per unit = (110880-71280)/(3190-990) Variable cost per unit = 39600/2200 Variable cost per unit = $18 Fixed Costs = 110880-3190*18 Fixed Costs = $53460 a) Variable cost=$18 per unit Total fixed cost=$53460 b) Total cost for 1500 units= 1500*18+53460=$80460 Therefore total cost for 1500 units is $80460

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