Archer Company is a wholesaler of custombuilt airconditionin

Archer Company is a wholesaler of custom-built air-conditioning units for commercial buildings. It gathered the following monthly data relating to units shipped and total shipping expense Units Total Shipping Month January February March April May June July Shipped 2 Expense $ 2,100 $ 2,600 $ 2,000 $ 2,300 $ 2,600 $ 3,300 $ 1,500 4 6 7 Exercise 5A-4 Part 2 2. Using the high-low method, estimate the cost formula for shipping expense Variable shipping expense Fixed shipping expense per unit per month

Solution

Variable shipping expense=[Total cost at highest level-Total cost at lowest level]/(Highest level-Lowest level)

=(3300-1500)/(7-1)

=$300 per unit

Fixed shipping expense=3300-(7*300)

=$1200 per month.