PE 21-1B High-low method

The manufacturing costs of Carrefour Enterprises for the first three months of the year are provided below.

                          Total Costs | Units Produced
June                      $300,000 | 2,700 units
July.                        440,000 | 5,500
August                    325,000 | 3,500

Using the high-low method, determine (a) the variable cost per unit and (b) the total fixed cost.

Answer:
a. $50 per unit = ($440,000 – $300,000) ÷ (5,500 units – 2,700 units)
b. $165,000 = $440,000 – ($50 × 5,500 units), or $300,000 – ($50 × 2,700 units)