Question

Strait Co. manufactures office furniture. During the most productive month of the year, 3,700 desks were manufactured at a total cost of $82,700. In the month of lowest production, the company made 1,100 desks at a cost of $56,700. Using the high-low method of cost estimation, total fixed costs are

Answer 1

Total fixed cost = $45,700

Working

		Cost	No. of activities
A	High Level	$          82,700.00	3700
B	Low Level	$          56,700.00	1100
C=A-B	Difference	$          26,000.00	2,600
A	Cost difference	$          26,000.00
B	No. of activities difference	2600
C=A/B	Variable cost per unit	$                   10.00
		High Level	Low Level
A	No. of activities	3700	1100
B	Variable cost per unit	$              10.0000	$               10.0000
C=AxB	Total Variable cost	$          37,000.00	$            11,000.00
D	Total cost	$          82,700.00	$            56,700.00
E=D-C	Total fixed cost	$          45,700.00	$            45,700.00