FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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1. Using the High-Low method, predict the cost of producing 900 treats.  Enter your answer rounded to the nearest whole number without a dollar sign or comma (i.e., 1250)

2. ABC Company leases a copy machine with terms that include a fixed fee each month plus a charge for each copy made. ABC made 9,000 copies and paid a total of $ 473 in January. In April, they paid $ 287 for 5,000 copies. What is the variable cost per copy if ABC uses the high-low method to analyze costs?  Enter your answer with two decimals (i.e., .xx)

The costs for Fido's Bakery for the year were:
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
# of Dog Treats
Produced
425
510
625
725
685
575
510
810
700
650
875
680
Factory Utility
Costs
$1659
$1,964
$ 2,406
$2,555
$2,637
$2,214
$3,333
$3,119
$ 2,695
$2,503
$3,369
$2,895
Using the High-Low method, predict the cost of producing 900 treats. Enter your answer rounded to the nearest whole number without a dollar sign
or comma (i.e., 1250)
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Transcribed Image Text:The costs for Fido's Bakery for the year were: Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec # of Dog Treats Produced 425 510 625 725 685 575 510 810 700 650 875 680 Factory Utility Costs $1659 $1,964 $ 2,406 $2,555 $2,637 $2,214 $3,333 $3,119 $ 2,695 $2,503 $3,369 $2,895 Using the High-Low method, predict the cost of producing 900 treats. Enter your answer rounded to the nearest whole number without a dollar sign or comma (i.e., 1250)
Expert Solution
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Step 1: Introduction of High low method

High Low Method - This method is used to segregate the variable and fixed cost. This method is basically used to calculate the per unit variable cost. Since production level constitutes mixed cost, a portion represents variable cost and other part is fixed cost. We can have a separate cost using the high-low method.

Variable cost per unit = (Highest Activity Cost - Lowest Activity Cost) / Highest Activity Units - Lowest Activity Units)

Variable Cost - Variable cost is the cost which is per unit fixed and varies with the level of production, If the production is high then there is high variable cost and if production is low then low variable cost and similarly if there is no production then no variable cost is required to be incurred.

Fixed Cost - as the name suggest this is fixed cost which means it has no relevance to the level of production, If there is no production then a fixed cost has to be incur. This cost remains same at all levels of activity/production.

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