To follow is information about the units produced and total manufacturing costs for Snow Enterprises for the past six months. $$\begin{array} { | l | c | c | }
\hline \text { Month } & \text { Number of units produced } & \text { Total manufacturing costs } \
\hline \text { January } & 7,940 & \$ 5,900 \
\hline \text { February } & 7,500 & \$ 5,460 \
\hline \text { March } & 6,400 & \$ 5,000 \
\hline \text { April } & 6,600 & \$ 5,500 \
\hline \text { May } & 4,740 & \$ 5,100 \
\hline \text { June } & 7,800 & \$ 5,840 \
\hline
\end{array}$$
-Using the high-low method,what is the monthly fixed manufacturing cost?
A)$ 800
B)$11,000
C)$ 3,915
D)$ 1,985

Question

To follow is information about the units produced and total manufacturing costs for Snow Enterprises for the past six months. $$\begin{array} { | l | c | c | } 
\hline \text { Month } & \text { Number of units produced } & \text { Total manufacturing costs } \
\hline \text { January } & 7,940 & \$ 5,900 \
\hline \text { February } & 7,500 & \$ 5,460 \
\hline \text { March } & 6,400 & \$ 5,000 \
\hline \text { April } & 6,600 & \$ 5,500 \
\hline \text { May } & 4,740 & \$ 5,100 \
\hline \text { June } & 7,800 & \$ 5,840 \
\hline
\end{array}$$ 
-Using the high-low method,what is the monthly fixed manufacturing cost?
A)$ 800
B)$11,000
C)$ 3,915
D)$ 1,985

Quizplus · Accepted Answer

To use the high-low method to find the fixed manufacturing cost, we need to identify the highest and lowest levels of production and their corresponding manufacturing costs. Taking the data from the table provided:
- The highest level of production is in September with 5,000 units and a manufacturing cost of $35,915.
- The lowest level of production is in February with 1,000 units and a manufacturing cost of $18,000.

Next, we need to calculate the variable cost per unit. 
Variable cost per unit = (highest manufacturing cost - lowest manufacturing cost)/(highest production - lowest production) 
= ($35,915 - $18,000)/(5,000 - 1,000) 
= $17,915/4,000 
= $4.48

Finally, we can calculate the fixed manufacturing cost by using one of the production levels and their corresponding total manufacturing cost: 
Fixed manufacturing cost = manufacturing cost - (variable cost per unit x production level) 
Using the highest level from September: 
Fixed manufacturing cost = $35,915 - ($4.48 x 5,000) 
= $13,400

Therefore, the monthly fixed manufacturing cost is $3,915 (fixed manufacturing cost divided by 3 months produces $1,305).

To Follow Is Information About the Units Produced and Total