Question

Westerville Company accumulates the following data concerning a mixed cost, using units produced as the activity level. Units Produced Total Cost March 10,079 $19,914 April 8,835 18,007 May 10,530 20,701 June 8,680 17,556 July 9,340 18,436 Compute the variable cost per unit using the high-low method. (Round variable cost per unit to 2 decimal places e.g. 12.25.) Variable cost per unit $ Compute the fixed cost elements using the high-low method. Fixed cost $ Estimate the total cost if the company produces 8,620 units. Total cost to produce 8,620 units $

Answer 1

Answer:

(i) $1.7 per unit

(ii) $2,800

(iii)  $17,454

Explanation:

(1) Variable cost per unit:

= (Total cost at high units - Total cost at low units) ÷ (high no. of units - low no. of units)

= ($20,701 - $17,556) ÷ (10,530 - 8,680)

= 3,145 ÷ 1,850

= $1.7 per unit

(2) Fixed cost = Total cost at 8,680 units - variable cost

                       = $17,556 - (8,680 units × $1.7)

                       = $17,556 - $14,756

                       = $2,800

(3) Total cost to produce 8,620 units:

= Variable cost + Fixed cost

= (8,620 units × $1.7 per unit) + $2,800

= $14,654 + $2,800

= $17,454