Fromme's Frocks has the following machine hours and production costs for the last six months of...

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Fromme's Frocks has the following machine hours and production costs for the last six months of...

Fromme's Frocks has the following machine hours and production costs for the last six months of last year:

Month	Machine Hours		Production Cost
July		16,500	$	12,150
August		15,000		12,300
September		13,000		9,650
October		17,000		12,230
November		16,300		11,767
December		13,600		9,967

If Fromme expects to incur 12,100 machine hours in January, what will be the estimated total production cost using the high-low method?

business accounting

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Answer 1

Answer #1

Variable cost = (Cost at highest activity - Cost at lowest activity) /(Highest activity-Lowest activity)

= (12,230-9,650)/(17,000-13000) = 0.645

Fixed cost = 12,230 - (17000*0.645) = 1265

Total Cost for 12100 mh

= (12100*0.645)+1265

= 9070 (select the nearest answer)

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Answer 2

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