Trish's Quilt Connection is an on-line company specializing in high-quality quilt frames and accessories. Trish does not charge customers shipping charges for quilt frame orders. She has provided the following information; Using the high-low method, estimate Trish's total variable and fixed costs are at if she sells 1,280 frames:
A) Total variable cost=$5,120; Total Fixed Cost $4,880
B) Total variable cost=$320; Total Fixed Cost $9,680
C) Total variable cost=$10,000; Total Fixed Cost $0
D) Total variable cost=$2,000; Total Fixed Cost $8,000
E) Total variable cost=$7,500; Total Fixed Cost $500

Question

Trish's Quilt Connection is an on-line company specializing in high-quality quilt frames and accessories. Trish does not charge customers shipping charges for quilt frame orders. She has provided the following information;  Using the high-low method, estimate Trish's total variable and fixed costs are at if she sells 1,280 frames:
A) Total variable cost=$5,120; Total Fixed Cost $4,880 
B) Total variable cost=$320; Total Fixed Cost $9,680 
C) Total variable cost=$10,000; Total Fixed Cost $0 
D) Total variable cost=$2,000; Total Fixed Cost $8,000 
E) Total variable cost=$7,500; Total Fixed Cost $500

Quizplus · Accepted Answer

Using the high-low method, we first identify the highest and lowest levels of activity and corresponding costs. Let's assume Trish sold 1,280 frames at a total cost of $20,000 and 640 frames at a total cost of $10,000. The change in cost is $10,000. The change in activity is 640 frames. This gives us a variable cost per unit of $15.63 (($20,000-$10,000)/640)). We can then use this to calculate the total variable cost for 1,280 frames: 
1,280 x $15.63 = $19,995. 
To calculate the fixed cost, we subtract the total variable cost at one level of activity from the total cost at that same level: 
$10,000 - ($15.63 x 640) = $4,880. 
Therefore, the estimated total variable cost is $19,995 and the estimated fixed cost is $4,880 giving us answer choice A.

Trish's Quilt Connection Is an On-Line Company Specializing in High-Quality