Question

Using the high-low method, Company X has determined the variable portion of its cost formula for electricity to be $2 per unit. For the month of July Company X estimates that total electricity cost will amount to $66,000 based on producing 30,000 units. The amount of fixed electricity cost estimated for July is:

Answer 1

Answer:

Fixed cost= $6,000

Explanation:

Giving the following information:

July:

Total cost= $66,000

Number of units= 30,000

Varaible cost per unit= $2

First, we need to calculate the total variable cost:

Total variable cost= 2*30,000

Total variable cost= $60,000

Now, the fixed cost:

Fixed cost= 66,000 - 60,000

Fixed cost= $6,000