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Below are the processing costs of Hansen Inc. observed for producing a type of mult-vitamin tablets...

Below are the processing costs of Hansen Inc. observed for producing a type of mult-vitamin tablets in bottles over the last 6 months:

Month
Units of bottles Produced
Processing Cost
1
5500
$36,000
2
9,000
$44,000
3
13,000
$51,000
4
3,500
$30,000
5
17,000
$39,000
6
4,500
$35,000

Use the high low method to determine the variable cost per unit and fixed cost per month. Express your results in the form of a linear equation

y = a + bx. (15 marks)


Predict the total processing cost if 22,000 units are produced. (10 marks)

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Answer #1

Answer:

Variable cost per unit (b) = $0.67 - ->>Refer working note 1

Fixed cost per month (a) = $27,655 ->>Refer working note 1

linear equation: y = $27,655 + $0.67x -->>Refer working note 2

Total processing cost if 22,000 units are produced = $42,395 ->>Refer working note 3

.

.

Working note 1 Step 1 - Identifying the highest, lowest activities and costs at the respective activities. X1 = Lowest level

.

Working note 2 Express your results in the form of a linear equation y = a + bx y = Total cost a = Fixed cost b = variable co

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