Question

In: Finance

2. For the information below, use the high-low method to determine the mixed cost equation. You...

2. For the information below, use the high-low method to determine the mixed cost equation. You must use both data for the high point, and the low point. You must show the equation (for both the high point and low point - meaning, you must to have TWO equations), not just what the variable cost is. – 4 marks

Units Cost

26 2400

40 3400

28 2600

36 3000

24 2200

Please show your work

Solutions

Expert Solution

Calculation of cost:
Cost at highest level of activity                  3,400.00
Cost at Lowest level of activity                  2,200.00
Highest level of activity                        40.00
Lowest Level of activity                        24.00
Variable cost per unit = (3400-2200)/(40-24)
Variable cost per unit =1200/16
Variable cost per unit = $75
Fixed Costs = 3400-(75*40)
Fixed Costs = $400
Let the number of units be 'x'
Variable cost equation= 75*x
Fixed cost= Total cost- (75*x)= 400
Mixed cost equation is Total cost= 400+75*x

Related Solutions

High-low method Ziegler Inc. has decided to use the high-low method to estimate the total cost...
High-low method Ziegler Inc. has decided to use the high-low method to estimate the total cost and the fixed and variable cost components of the total cost. The data for various levels of production are as follows: Units Produced Total Costs 104,500 $30,703,250 119,500 33,380,750 136,500 36,415,250 This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below. Determine the variable cost per unit and...
In applying the high-low method of cost estimation to mixed costs, how is the total fixed...
In applying the high-low method of cost estimation to mixed costs, how is the total fixed cost estimated? If fixed costs increase, what would be the impact on the (a) contribution margin? (b) income from operations? An examination of the accounting records of Clowney Company disclosed a high contribution margin ratio and production at a level below maximum capacity. Based on this information, suggest a likely means of improving income from operations. Explain.
High-Low Method, Cost Formulas During the past year, the high and low use of three different...
High-Low Method, Cost Formulas During the past year, the high and low use of three different resources for Fly High Airlines occurred in July and April. The resources are airplane depreciation, fuel, and airplane maintenance. The number of airplane flight hours is the driver. The total costs of the three resources and the related number of airplane flight hours are as follows: Resource Airplane Flight Hours Total Cost Airplane depreciation: High 44,000 $ 18,400,000 Low 28,000 $ 18,400,000 Fuel: High...
High-Low Method, Cost Formulas During the past year, the high and low use of three different...
High-Low Method, Cost Formulas During the past year, the high and low use of three different resources for Fly High Airlines occurred in July and April. The resources are airplane depreciation, fuel, and airplane maintenance. The number of airplane flight hours is the driver. The total costs of the three resources and the related number of airplane flight hours are as follows: Resource Airplane Flight Hours Total Cost Airplane depreciation: High 44,000 $ 18,000,000 Low 28,000 $ 18,000,000 Fuel: High...
2. WRKSHT 2 – High/Low Method Computations a. Determine the Cost Estimation Equations assuming i. Independent...
2. WRKSHT 2 – High/Low Method Computations a. Determine the Cost Estimation Equations assuming i. Independent Variable = “Thousands of Units Produced” ii. Independent Variable = “Number of Paid Days” b. Determine the Cost Estimates for the cost equations above. (SEE BELOW for “Information for Computing Cost Estimates” on next page) 3. WRKSHT 3 – Simple Regression - Indep. Variable = “Thousands of Units Produced” a. Complete and format the regression results, then b. Document the cost estimation equation, and...
Discuss what fixed, variable, and mixed costs are and the high-low method for dealing with mixed...
Discuss what fixed, variable, and mixed costs are and the high-low method for dealing with mixed costs
Pearson Electric Company uses the high-low method to analyze mixed costs. The following information relates to...
Pearson Electric Company uses the high-low method to analyze mixed costs. The following information relates to the production data for the first six months of the year. Month Cost(Y) Hours(H) January $ 8,220 365 February $ 10,000 800 March $ 8,240 480 April $ 8,360 400 May $ 10,380 1,085 June $ 9,750 775 How should the cost function be properly stated using the high-low method? rev: 10_11_2019_QC_CS-185082 Multiple Choice Y = $6,630 + $2.00H. Y = $7,125 + $3.00H....
Pearson Electric Company uses the high-low method to analyze mixed costs. The following information relates to...
Pearson Electric Company uses the high-low method to analyze mixed costs. The following information relates to the production data for the first six months of the year. Month Cost(Y) Hours(H) January $ 8,050 335 February $ 9,750 780 March $ 8,040 460 April $ 8,110 380 May $ 10,210 1,055 June $ 9,510 755 What is the estimated total cost at an operating level of 1,180 hours, using the high-low method? (Round variable cost per unit to 2 decimal places.)
1. High-Low Method for a Service Company Boston Railroad decided to use the high-low method and...
1. High-Low Method for a Service Company Boston Railroad decided to use the high-low method and operating data from the past six months to estimate the fixed and variable components of transportation costs. The activity base used by Boston Railroad is a measure of railroad operating activity, termed “gross-ton miles,” which is the total number of tons multiplied by the miles moved. Transportation Costs Gross-Ton Miles January $854,100 325,000 February 952,200 363,000 March 673,000 235,000 April 913,000 351,000 May 765,700...
1. High-Low Method for a Service Company Boston Railroad decided to use the high-low method and...
1. High-Low Method for a Service Company Boston Railroad decided to use the high-low method and operating data from the past six months to estimate the fixed and variable components of transportation costs. The activity base used by Boston Railroad is a measure of railroad operating activity, termed “gross-ton miles,” which is the total number of tons multiplied by the miles moved. Transportation Costs Gross-Ton Miles January $929,600 247,000 February 1,036,400 276,000 March 732,500 179,000 April 993,700 268,000 May 833,400...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT