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Alden Co.’s monthly unit sales and total cost data for its operating activities of the past year follow. Management wants to use these data to predict future fixed and variable costs.

   

Month Units Sold Total Cost Month Units Sold Total Cost
1 316,000 $ 153,500 7 364,000 $ 307,376
2 161,000 97,250 8 266,000 147,750
3 261,000 201,600 9 76,800 69,000
4 201,000 96,000 10 146,000 126,625
5 286,000 197,500 11 90,000 90,000
6 186,000 108,000 12 96,000 85,650

2. Estimate both the variable costs per unit and the total monthly fixed costs using the high-low method. (Do not round intermediate calculations.)

please guy show step by step

Answer 1

Answer:- a)-High-Low Method:-

Variable Cost per Unit

Variable cost per unit (b) is calculated using the following formula:

Variable cost per unit=Y2-Y1/X2-X1

Where,
y2 is the total cost at highest level of activity;
y1 is the total cost at lowest level of activity;
x2 are the number of units/miles/ labor ,machine hours etc. at highest level of activity; and
x1 are the number of units/miles/ labor, machine hours etc. at lowest level of activity

The variable cost per unit is equal to the slope of the cost volume line (i.e. change in total cost ÷ change in number of machine hours).

Total Fixed Cost

Total fixed cost (a) is calculated by subtracting total variable cost from total cost, thus:

Total Fixed Cost = y2 – b*x2 = y1 – b*x1

We have,
at highest activity: x₂ = 364000 units; y₂ = $307376
at lowest activity: x₁ = 76800 units; y₁ = $69000

Variable Cost per unit = ($307376− $69000) ÷ (364000 −76800)  

= $238376/287200 units =$.0.83 per unit

Total Fixed Cost = $69000 − ($0.83 × 76800) = $69000 – $63744 =$5256