Question: please explain how to get the total fixed cost and unit vc as well as the answers!! thanks! Question 5: Cost structure estimation month activity
please explain how to get the total fixed cost and unit vc as well as the answers!! thanks!Question 5: Cost structure estimation month activity volume in units total costs Oct 80 $7,850 Nov 70 $8,000 Dec 100 $9,500 a) Which cost structure estimation method should we use? account classification method high-low method b) To identify the low and high points, we should look for lowest/highest costs lowest/highest activity c) Estimate the cost structure parameters: total FC= unit VC= = Write down the total cost equation TC = + * volume d) Predict the total costs of producing 110 units: TC = c) Estimate the cost structure parameters: total FC unit VC= = Write down the total cost equation TC = + - volume d) Predict the total costs of producing 110 units: TC = e) Can we use the estimates from (c) to predict costs at volume of 5,000 units? YES: Just plug in volume=5,000 in the total cost equation, NO: 5,000 units is outside the relevant range (the normal range of activity is around 70-100 units)
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