Mega CVBA had average total cost per unit of $10.43 at 4,000 units and $8.55 at...

Mega CVBA had average total cost per unit of $10.43 at 4,000 units and $8.55 at 11,000 units.

What is the fixed cost for Mega?

Please show work and thank you.

Expert Solution

Fixed cost would be $ 11,817.14 or just $11,817 depending on round off.

.

I have not rounded intermediate calculations so if the answer do not match please leave a comment below with round off requirements.

Working

High low method is used to calculate cost.

Average cost (A)	Units (B)	Total Cost (A x B)
$ 10.43	4000	$ 41,720.00
$ 8.55	11000	$ 94,050.00

.

		Cost	No. of activities
A	High Level	$ 94,050.00	11000
B	Low Level	$ 41,720.00	4000
C=A-B	Difference	$ 52,330.00	$ 7,000.00

A	Cost difference	$ 52,330.00
B	No. of activities difference	7000
C=A/B	Variable cost per unit	$ 7.4757

		High Level	Low Level
A	No. of activities	11000	4000
B	Variable cost per unit	$ 7.4757	$ 7.4757
C=AxB	Total Variable cost	$ 82,232.86	$ 29,902.86
D	Total cost	$ 94,050.00	$ 41,720.00
E=D-C	Total fixed cost	$ 11,817.14	$ 11,817.14

ekkarill92 answered 1 year ago

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