The table below shows monthly data collected on production costs and on the number of units produced over a twelve month period.

Month Total Production Costs Level of Activity (Units Produced)

July $230,000 3,500

August 250,000 3,750

September 260,000 3,800

October 220,000 3,400

November 340,000 5,800

December 330,000 5,500

January 200,000 2,900

February 210,000 3,300

March 240,000 3,600

April 380,000 5,900

May 350,000 5,600

June 290,000 5,000

a) Determine the variable cost per unit and the fixed cost using the high-low method.

b) What is the equation of the total mixed cost function?

c) Based on the High-Low method, what is the total production costs if 6,500 units are produced?

d) Prepare the scatter diagram and insert the trendline or line of best-fit. Use a scale of 2 cm to represent 1,000 units on the x-axis & 2 cm to represent $50,000 on the y-axis.

e) Using the line of best-fit, determine the company’s fixed cost per month and the variable cost per unit. (Use 0 & 5,000 units.)

f) Which of the two methods appear more appropriate? Explain your answer

Answer rating: 100% (QA)

a The variable cost per unit and the fixed cost using the highlow method can be calculated as follow... View the full answer