Question

Question 1 Mace Company accumulates the following data concerning a mixed cost, using miles as the activity level. January 10.00 $15,000 13,500 4,400 12,500 February 8,00 March 9,000 7,500 April Instructions Compute the variable and fixed cost elements using the high-low method.

Answer 1

Answers

• All working forms part of the answer
• High Low Working

	Months	Miles drivem	Cost
High Level	January	10,000	$                   15,000.00
Low Level	April	7,500	$                   12,500.00
Difference		2,500	$                     2,500.00

• Variable cost per miles driven

Difference in Cost	$                                                               2,500.00
Difference in miles	2,500
Variable cost per unit	$                                                                       1.00 [$2500 / 2500]

• Fixed Cost

Working		High Level	Low Level
A	Total Cost	$                 15,000.00	$                   12,500.00
B	Total miles driven	10000	7500
C	Variable cost per unit	$                           1.00	$                             1.00
D = B x C	Total Variable cost	$                 10,000.00	$                     7,500.00
E = A - D	Total Fixed Cost	$                   5,000.00	$                     5,000.00

• Answers

--Variable cost = $ 1.00 per mile driven

--Fixed C0st = $ 5000 per month