ACCA MA · Chapter 3 · Question 5 of 10
A company recorded the following total costs: 4,000 units: $46,000 5,500 units: $53,900 7,000 units: $61,000 Using the high-low method, what is the expected total cost of producing 8,000 units?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) $66,000
Explanation
The high-low method uses only the highest and lowest activity levels. Variable cost per unit = (61,000 - 46,000) / (7,000 - 4,000) = 15,000 / 3,000 = $5. Fixed cost = 46,000 - (4,000 x 5) = $26,000. Total cost at 8,000 units = 26,000 + (8,000 x 5) = $66,000.
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