Question

Support Slip-Ons Inc, a manufacturer of men's dress shoes, uses the high low method to estimate cost behaviors. In its current manufacturing operations, three different cost types are incurred: A, B, and C. Per unit costs for each cost type at two different activity levels are as follows: А B C 5.000 pairs of shoes 7.500 pairs of shoes $4,00 $6.00 $3.00 $4,00 $9.00 $4.00 If 6,000 pairs of shoes are produced, the total manufacturing costs would be: Select one: a $85,000 b. $125,000 c. $100,000 d. $110,000 e. $90,000

Answer 1

Answer:

Option e is the correct answer i.e. $90,000

Explanation:

Units A 5,000 $ 20,000 $ 7,500 $ 30,000 $ $4 [($30,000 - 20,000)/ Variable Cost per unit (7,500 - 5,000)] B с 45,000 $ 20,000 45,000 $ 22,500 $1 [($22,500 - 20,000) / 0 (7,500 - 5,000)] $15,000 45,000 [$20,000 - (5,000*$1)] Fixed cost 이 $

Cost type A is fully variable in nature.

Cost type B is fully fixed in nature.

Cost type C is semi-variable in nature.

Manufacturing cost for 6,000 pairs:

B Number of pairs Variable cost per unit Total variable cost Fixed cost Total cost A 6,000 4 24,000 0 24,000 $ 6,000 0 0 45,000 45,000 $ Total 6,000 1 6,000 30,000 15,000 60,000 21,000 $ 90,000 $