The following information was available about supplies cost for the first three months of the year. MonthProduction VolumeSupplies Cost January1,400$ 6,370 February3,200$14,200 March1,200$ 5,400 Using the high-low method, an estimate of supplies cost at 3,000 units of production would be:Question 6Select one:a.$13,050b.$13,200c.$13,320d.$13,330
Question
The following information was available about supplies cost for the first three months of the year. MonthProduction VolumeSupplies Cost January1,40014,200 March1,20013,050b.13,320d.$13,330
Solution
To solve this problem using the high-low method, we first need to find the variable cost per unit and then the fixed cost.
Step 1: Find the variable cost per unit The variable cost per unit is calculated by taking the difference in cost between the highest and lowest activity levels and dividing it by the difference in the number of units at the highest and lowest activity levels.
In this case, the highest activity level is in February (3,200 units, 5,400 cost).
Variable cost per unit = (Cost at high activity level - Cost at low activity level) / (High activity level - Low activity level) = (5,400) / (3,200 units - 1,200 units) = 4.40 per unit
Step 2: Find the fixed cost The fixed cost is calculated by taking the total cost at either the high or low activity level and subtracting the product of the variable cost per unit and the number of units at that activity level.
Let's use the high activity level (February) for this calculation:
Fixed cost = Total cost at high activity level - (Variable cost per unit * Number of units at high activity level) = 4.40 * 3,200 units) = 14,080 = $120
Step 3: Estimate the supplies cost at 3,000 units of production Now that we have the variable cost per unit and the fixed cost, we can estimate the supplies cost at 3,000 units of production:
Supplies cost = (Variable cost per unit * Number of units) + Fixed cost = (120 = 120 = $13,320
So, the answer is c. $13,320.
Similar Questions
The following information is available for electricity costs for the first six months of the year. MonthProduction VolumeElectricity Cost January2,800$2,100 February5,6003,600 March6,4003,800 April3,5002,600 May2,4001,600 June4,2002,700 Using the high-low method, an estimate of electricity costs at 3,000 units of production would be:Question 7Select one:a.$1,930b.$2,050c.$2,372d.$3,730
A budget includes $64,000 for salaries, $12,000 for supplies and $4,000 for equipment. If this budget is increased proportionately until the total amount is $84,000, the amount spent on supplies will be:
Fill in the Blank QuestionFill in the blank question.A manufacturing company has budgeted production of 5,000 units for May and 4,400 units in June. Each unit requires 3 pounds of materials at a cost of $10 per pound. On May 1, there are 2,750 pounds of materials on hand. The company desires an ending materials inventory of 60% of the next month's materials requirements. The total cost of direct materials purchases for May will be $.
A manufacturing company has units to produce of 940 units for the month. Each unit requires 3.5 hours of labor to produce. The cost of direct labor is $15 per hour. The total cost of direct labor for the month will be $.
Use the following inventory information for the month of July to answer the below question. July 1 Beginning inventory 20 units at $19 $380 July 7 Purchases 70 units at $20 $1 400 July 22 Purchases 10 units at $22 $220 $2 000 A physical count of inventory on July 30 reveals that there are 35 units on hand. Using the FIFO inventory method, the amount allocated to cost of sales for July is: Group of answer choices $680 $720 $1 280 $1 320
Upgrade your grade with Knowee
Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.