E21-30 Determing Mixed Costs�The High-Low Method
Assignment solution on cost estimation using the high-low method.
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E21-30 Determing Mixed Costs—The High-Low Method
The manager of Able Car Inspection reviewed the monthly operating costs
for the past year. The costs ranged from $4,000 for 1,000 inspections to
$3,600 for 600 inspections.
Requirements
1. Calculate the variable cost per inspection.
High 1,000 inspections $4,000
Low 600 inspections $3,600
Difference 400 inspections $400
Variable cost $1 per inspection ($400 / 400)
2. Calculate the total fixed costs.
Fixed cost = Total cost – Variable cost
Take high level
= $4,000 – (1,000 x $1)
= $4,000 - $1,000
= $3,000
Fixed cost = $3,000
3. Write the equation and calculate the operating costs for 800 inspections.
Equation of Total cost = Fixed cost + Variable cost
= $3,000 + $n
Cost of 800 inspections = $3,000 + ($1 x 800)
= $3,800
The manager of Able Car Inspection reviewed the monthly operating costs
for the past year. The costs ranged from $4,000 for 1,000 inspections to
$3,600 for 600 inspections.
Requirements
1. Calculate the variable cost per inspection.
High 1,000 inspections $4,000
Low 600 inspections $3,600
Difference 400 inspections $400
Variable cost $1 per inspection ($400 / 400)
2. Calculate the total fixed costs.
Fixed cost = Total cost – Variable cost
Take high level
= $4,000 – (1,000 x $1)
= $4,000 - $1,000
= $3,000
Fixed cost = $3,000
3. Write the equation and calculate the operating costs for 800 inspections.
Equation of Total cost = Fixed cost + Variable cost
= $3,000 + $n
Cost of 800 inspections = $3,000 + ($1 x 800)
= $3,800
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Document Details
University
Grand Canyon University
Subject
Accounting