Question

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
1,260			$221,760
2,610			277,690
4,060			344,960

a. Determine the variable cost per unit and the total fixed cost.

Variable cost: (Round to the nearest dollar.)	$ per unit
Total fixed cost:	$

b. Based on part (a), estimate the total cost for 1,920 units of production.

Total cost for 1,920 units:

$

Answer 1

• All working forms part of the answer

		Units	Cost
High Level		4060	$ 344,960.00
Low Level		1260	$ 221,760.00
Difference		2800	$ 123,200.00

• Requirement ‘a’, along with working

Difference in Cost	$                                 123,200.00
Difference in units	2800
Variable cost per unit	$                                           44.00

Working		High Level	Low Level
A	Total Cost	$   344,960.00	$ 221,760.00
B	Total Units	4060	1260
C	Variable cost per unit	$              44.00	$            44.00
D = B x C	Total Variable cost	$   178,640.00	$    55,440.00
E = A - D	Total Fixed Cost	$   166,320.00	$ 166,320.00

--Answer .

Variable cost: (Round to the nearest dollar.)	$ 44.00 per unit
Total fixed cost:	$ 166,320.00

• Requirement ‘b’

Cost of 1920 units = (1,920 units x $ 44 per unit) + $ 166,320

= $ 84,480 + $ 166,320

= $ 250,800

Total cost for 1,920 units:

$ 250,800