Alden Co.’s monthly unit sales and total cost data for its operating activities

Question

Alden Co.’s monthly unit sales and total cost data for its operating activities of the past year follow. Management wants to use these data to predict future fixed and variable costs.

   

Estimate both the variable costs per unit and the total monthly fixed costs using the high-low method. (Do not round intermediate calculations.)

Predict future total costs when sales volume is (a) 376,000 units and (b) 416,000 units.

Month Units Sold Total Cost Month Units Sold Total Cost 1 318,000 $ 155,500 7 362,000 $ 292,624 2 163,000 99,250 8 268,000 149,750 3 263,000 203,600 9 76,400 67,000 4 203,000 98,000 10 148,000 128,625 5 288,000 199,500 11 92,000 92,000 6 188,000 110,000 12 98,000 83,650

Estimate both the variable costs per unit and the total monthly fixed costs using the high-low method. (Do not round intermediate calculations.)

High-Low method - Calculation of Variable Cost per Sales Dollar Change in cost Cost at high point minus cost at low point $225,624 Variable cost per sales dollar = $0.79 Change in volume Volume at high point minus volume at low point $285,600 High-Low method - Calculation of Fixed Costs Total cost at the high point $292,624.00 Variable costs at the high point: Volume at the high point: 362,000 units sold Variable cost per sales dollar $0.79 Total variable costs at the high point 285,980.00 Total fixed costs Total cost at the low point Variable costs at the low point: Volume at the low point: Variable cost per sales dollar Total variable costs at the low point Total fixed costs

Explanation / Answer

Change in cost Cost at high point minus cost at low point 225,624 (292,624 - 67,000) Variable cost per sales dollar = $0.79 Change in volume Volume at high point minus volume at low point 285,600 (362,000 - 76,400) High-Low method - Calculation of Fixed Costs Total cost at the high point 292,624 Variable costs at the high point: Volume at the high point: 362,000 units Variable cost per sales dollar 0.79 Total variable costs at the high point 285,980 Total fixed costs 6644 (292,624 - 285,980) Total cost at the low point 67,000 Variable costs at the low point: Volume at the low point: 76,400 units Variable cost per sales dollar 0.79 Total variable costs at the low point 60,356 Total fixed costs 6,644 (67,000 - 60,356) Predictions Sales (units) 376,000 416,000 Variable costs 297,040 (376,000*0.79) 328,640 (416,000*0.79) Fixed costs 6,644 6,644 Total costs 303,684 332,284

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.