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Tashiro Inc

Finance

Tashiro Inc. has decided to use the high-low method to estimate the total cost and the fixed and variable cost components of the total cost. The data for various levels of production are as follows:

 

Units Produced Total Costs

4,930 $365,400  

2,030 234,900  

3,060 252,130  

a. Determine the variable cost per unit and the total fixed cost.

 

Variable cost (Round to two decimal places.) $fill in the blank 1

per unit

Total fixed cost $fill in the blank 2

b. Based on part (a), estimate the total cost for 2,510 units of production.

 

Total cost for 2,510 units: $fill in the blank 3

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a) Computation of variable cost per unit and the total fixed cost:

Given,

Highest activity cost = $365,400

Lowest activity cost = $234,900

Highest activity = 4,930

Lowest activity = 2,030

Variable cost per unit = (Highest activity cost - Lowest activity cost)/(Highest activity - Lowest activity)

= (365400-234900)/(4930-2030)

= 130,500/2,900

Variable cost per unit = $45 per unit

 

Total fixed cost = Highest activity cost - Highest activity * Variable cost per hour

= 365400- (4930 * 45)

= 365400-221,850

Total fixed cost = $143,550

 

b) Computation of Total cost for 2,510 units of production:

Total cost for 2,510 units of production = Total Fixed Cost + Total Variable Cost

= $143,550 + (2,510*45)

= $143,550 + $112,950

Total cost for 2,510 units of production = $256,500

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