Show steps please Thanks 31 The total costs associated with

31. The total costs associated with particular product runs have been recorded as follows: Number of units produced Cost &thousands;) 100 150 200 250 300 435 580 700 800 950 The fixed costs for this process are (to the nearest £10000)

Solution

Using high low method we can split a mixed into fixed and variable components. Step 1 Calculate variable cost per unit Variable cost per unit = [y2 - y1] / [x2 - x1] y2 is the total cost at highest level of activity = £950000 y1 is the total cost at lowest level of activity = £435000 x2 are the number of units at highest level of activity = 300 x1 are the number of units at lowest level of activity = 100 Variable cost per unit = [£950000 - £435000] / [300 - 100] = £2575 per unit Step 2 Total fixed cost is calculated by subtracting total variable cost from total cost. Total fixed cost = y2 bx2 b = variable cost per unit = £2575 Total fixed cost = £950000 [£2575 * 300 units] = £177500 The answer is as under, The fixed cost for this process are £17.75 (to the nearest 10000)