Pearson Electric Company uses the high-low method to analyze mixed costs. The following information relates to...

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Pearson Electric Company uses the high-low method to analyze mixed costs. The following information relates to the production

Multiple Choice Ο Y« $7,525 + $2.00H. Ο Y = $8,020 + $3.0ΟΗ. Ο Y = $7,585 + $2.00H. Ο Y = $7,750 + $3.0ΟΗ.

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Answer 1

Answer #1

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Correct Answer = Option #2:
Y = $ 8020 + $ 3.00H
where $ 8020 is the fixed cost per month, and
$ 3.00 is the variable cost per hour
Above variable cost and fixed cost is calculated below using HIGH LOW method

	Months	Units	Cost
High Level	May	1,220	$ 11,680.00
Low Level	Jan	500	$ 9,520.00
Difference		720	$ 2,160.00

A	Difference in Cost		$ 2,160.00
B	Difference in units		720
C = A/B	Variable cost per unit		$ 3.000

Working		High Level	Low Level
A	Total Cost	$ 11,680.00	$ 9,520.00
B	Total Units	1220	500
C	Variable cost per unit	$ 3.00	$ 3.00
D = B x C	Total Variable cost	$ 3,660.00	$ 1,500.00
E = A - D	Total Fixed Cost	$ 8,020.00	$ 8,020.00

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Answer 2

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