Question

Felix & Co. reports the following information about its sales and cost of sales.

  

Period	UnitsSold	Cost of Sales		Period	UnitsSold	Cost of Sales
1	0	$	2,500	6	2,000	5,500
2	400		3,100	7	2,400	6,100
3	800		3,700	8	2,800	6,700
4	1,200		4,300	9	3,200	7,300
5	1,600		4,900	10	3,600	7,900

  

Hint: (Draw an estimated line of cost behavior using a scatter diagram offline.)

  

Complete the below table to calculate the fixed cost and variable cost of sales by using the high-low method.

High-Low method - Calculation of variable cost per unitHigh-Low method - Calculation of fixed costsTotal cost at the high pointVariable costs at the high point:Volume at the high point:Variable cost per unitTotal variable costs at the high pointTotal fixed costsTotal cost at the low pointVariable costs at the low point:Volume at the low point:Variable cost per unitTotal variable costs at the low pointTotal fixed costs

Answer 1

Solution

		Cost	No. of activities
A	High point	$           2,500.00	0
B	Low Point	$           7,900.00	3600
C=A-B	Difference	$         (5,400.00)	-3600
A	Cost difference	$         (5,400.00)
B	No. of Activities difference	-3600
C=A/B	Variable cost per unit	$ 1.50	At both high and low point
		High point	Low Point
A	No. of activities	0	3600
B	Variable cost per unit	$                   1.50	$                1.50
C=AxB	Total Variable cost	$                        -	$       5,400.00
D	Total cost	$           2,500.00	$       7,900.00
E=D-C	Total fixed cost	$           2,500.00	$       2,500.00