E6-42B Use the high-low method (Learning Objective 4)

Caltex has never used the high-low method in its engine oil production cost management.

The manager provided the following sales and cost data for the last 6 months of operation:

Year Costs of manufacturing Units produced July....................................................................... $102,000 28,000 August.................................................................. $110,000 30,000 September............................................................ $126,000 32,000 October................................................................ $132,000 35,000 November............................................................ $144,000 36,500 December............................................................. $152,000 39,000 Caltex is considering using the high-low method to analyze the production cost behavior in the coming year.

Requirements 1. What is the variable cost per units produced?

2. What is the fixed cost per units produced?

3. What is the total manufacturing cost if 38,000 units were produced?