Question

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

Answer 1

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