Given the following cost and activity observations for Smithson Company's utilities, use the high-low method to calculate Smithson's fixed costs per month. Do not round your intermediate calculations.
A) $1,533
B) $2,530
C) $22,800
D) $50,600

Question

Given the following cost and activity observations for Smithson Company's utilities, use the high-low method to calculate Smithson's fixed costs per month. Do not round your intermediate calculations. 
A) $1,533 
B) $2,530 
C) $22,800 
D) $50,600

Quizplus · Accepted Answer

Using the high-low method:
Highest activity: 14,100 units at $11,970
Lowest activity: 9,500 units at $9,661
Variable cost per unit: ($11,970 - $9,661) / (14,100 - 9,500) = $0.53
Total fixed costs: $11,970 - ($0.53 x 14,100) = $8,445
Fixed costs per month: $8,445 / 5 months = $1,689
The answer choices that match the calculated fixed costs per month are A ($1,533) and B ($2,530). However, since the question asks for fixed costs per month, the correct answer is A, which is the closest match to the calculated value.

Given the Following Cost and Activity Observations for Smithson Company's