Shatner Inc. has decided to use the high-low method to estimate the total cost a

Question

Shatner Inc. has decided to use the high-low method to estimate the total cost and the fixed and variable cost components of the total cost. The data for various levels of production are as follows:

Units Produced Total Costs
4,100 $478,680
1,980 435,600
6,380 677,600

a. Determine the variable cost per unit and the total fixed cost.

Variable cost: (Round to the nearest dollar.) $ per unit
Total fixed cost: $

b. Based on part (a), estimate the total cost for 3,010 units of production.

Total cost for 3,010 units: $

Explanation / Answer

a. Variable Cost per unit = ($677,600 - $435,600) / (6,380 - 1,980) = $55

Total Fixed Cost = $677,600 - (6,380 x $55) = $326,700

b. Total cost for 3,010 units = (3,010 x $55) + $326,700 = $492,250

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