Fremont, which uses the high-low method, reported total costs of $10.40 per unit at its lowest...

Fremont, which uses the high-low method, reported total costs of $10.40 per unit at its lowest production level, 5,000 units. When production tripled to its highest level, the total cost per unit dropped to $6.40. Fremont would estimate its total fixed cost as:

$6.40

$30,000

$52,000

$16.80

Solutions

Expert Solution

Answer-

Total cost on low activity = 5,000*10 .40 = 52,000

Total cost on high activity = 15,000*6.40 = 96,000

Variable cost per unit = (96,000-52,000)/(15,000-5,000) = 4.40per unit

Fixed cost = 96,000-(15,000*4.40) = 30,000

So answer is b) $30,000

ekkarill92 answered 2 years ago

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