16. A company is using the high-low method and has determined the following prod

Question

16. A company is using the high-low method and has determined the following production for the months of January, February, March, and April of 6,000, 5,000, 5,550, and 2,000, respectively. During the same months, the costs were $500,000, 400,000, 425,000, and 200,000. The fixed costs are:

a. 150,000
b. 450,000
c. 50,000
d. 75,000

17. Three cost incurred by the Kenyon Company are summarized below:
1,000 Units 2,000 Units
Cost A $10,000 $9,000
Cost B $21,000 $21,000
Cost C $16,000 $32,000

Which of these costs are variable?
A. A, B and C
B. A and C
C. A Only
D. C Only

18: Conan Company’s monthly activity level ranged from a low of 17,000 units in May to a high of 26,000 units in October. Average production was 20,000 units per month. Utilities cost was $8,250 in May and $10,500 in October. The variable utility cost per unit, to the nearest cent, is:
A. $0.25
B. $0.40
C. $0.47
D. $0.49

Explanation / Answer

Cost of production (High) = $500,000

Cost of production (Low) = $200,000

[$500,000 - $200,000] = $300,000

[$300,000 / (6,000 – 2,000] = $75

6,000 * $75 = $450,000

Hence, the correct option is (b) $450,000

Option (B) A and C are variable costs

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