QUESTION 10 method what are the fixed and variable costs if

QUESTION 10 method, what are the fixed and variable costs if the high sales revenue is $160,000 with total costs of $ 96.000 with total costs of $58,000. What is the fixed cost and the variable per dollar of salesr $9,750 fixed and 32.5% per dollar of sales revenue O $10,000 fixed and 50% per dollar of sales revenue O $6,750 fixed and 32.5% per dollar of sales revenue S4.240 fixed and 56% per dollar of sales revenue Click Save and Submit to save and submit. Click Save All Save All Answers 0 Type here to search 19 10 f7

Solution

Given data:

High sales revenue is $160,000 with total cost of $90,000, and Low sales revenue is $96,000 with total cost of $ 58,000.

But here units produced not given.

Assume at sales of $ 160,000 is 100 units and $ 96,000 is 60 units.

High-Low method is one of the several techniques used to split a mixed cost into its fixed and variable components. These figures are then used to calculate the approximate variable cost per unit (b) and total fixed cost (a) to obtain a cost volume formula:

y = a + bx

High-Low Method Formulas:

Variable Cost per Unit:

Variable cost per unit (b) is calculated using the following formula:

Variable Cost per Unit= y₂ ? y₁

                                        x₂ ? x₁

Where,
y₂ is the total cost at highest level of activity;
y₁ is the total cost at lowest level of activity;
x₂ are the number of units/labor hours etc. at highest level of activity; and
x₁ are the number of units/labor hours etc. at lowest level of activity

The variable cost per unit is equal to the slope of the cost volume line (i.e. change in total cost ÷ change in number of units produced).

The volume and the corresponding total cost information of the factory for past four months are given below:

Level

Units

Cost

At 100 %

100

$ 90,000

At 60%

    60

$ 58,000

Solution:

We have,
at highest activity: x₂ = 100; y₂ = $ 90,000
at lowest activity: x₁ =    60; y₁ = $ 58,000

Variable Cost per Unit = ($ 90,000 ? $ 58,000) ÷ (100 ?60) = $ 800 per unit

Total Fixed Cost:

Total fixed cost(a) is calculated by substracting total varible cost from total cost, thus:

Total fixed cost = y₂ ? bx₂ = y₁ ? bx₁

Total Fixed Cost = $90,000 ? ($800 × 100) = $10,000

    = $58,000 ? ($800 × 60) = $10,000

Final Answer: $ 10,000 fixed and 50% per dollar of sales revenue

Level	Units	Cost
At 100 %	100	$ 90,000
At 60%	60	$ 58,000