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Tashiro Inc
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
Expert Solution
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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