Question

Do It! Review 18-2 (Part Level Submission) Westerville Company accumulates the following data concerning a mixed cost, using units produced as the activity level. Units Produced Total Cost March 9,970 $20,005 April 8,930 18,154 May 10,500 20,735 June 8,710 17,674 July 9,370 18,604 (a1) Your answer is correct. Compute the variable cost per unit using the high-low method. (Round variable cost per unit to 2 decimal places e.g. 12.25.) Variable cost per unit $ Click if you would like to Show Work for this question: Open Show Work Show Solution Show Answer Link to Text Attempts: 1 of 3 used (a2) Your answer is incorrect. Try again. Compute the fixed cost elements using the high-low method. (Round answer to 0 decimal places, e.g. 5,275.) Fixed cost $ Click if you would like to Show Work for this question: Open Show Work Show Solution Show Answer Link to Text Attempts: 3 of 3 used (b) Estimate the total cost if the company produces 9,000 units. (Round answer to 0 decimal places, e.g. 5,275.) Total cost to produce 9,000 units $

Answer 1

Solution a1:

Variable cost per unit = (Cost at higher level of activity - Cost at lower level of activity)/ (Higher level activity - Lower level activity)

= ($20735 - $17674)/ (10500-8710)

= $1.71

Solution a2:

Fixed Cost = $20735 - (10500*1.71) = $2,780

Solution b:

Total cost to produce 9,000 units= $2780 +(9000*$1.71) = $18,170