In applying the high-low method what is the fixed cost? $\begin{array}{ccc}
\text { Month } & \text { Miles } & \text { Total Cost } \
\text { January } & 80,000 & \$ 192,000 \
\text { February } & 50,000 & 160,000 \
\text { March } & 70,000 & 188,000 \
\text { April } & 90,000 & 260,000 \

\end{array}$
A) $35000
B) $72000
C) $28000
D) $100000

Question

In applying the high-low method what is the fixed cost? $\begin{array}{ccc}
 \text { Month } & \text { Miles } & \text { Total Cost } \
\text { January } & 80,000 & \$ 192,000 \
 \text { February } & 50,000 & 160,000 \
 \text { March } & 70,000 & 188,000 \
 \text { April } & 90,000 & 260,000 \

\end{array}$
A) $35000
B) $72000
C) $28000
D) $100000

Quizplus · Accepted Answer

To find the fixed cost using the high-low method, first, calculate the variable cost per unit using the highest and lowest activity levels. The difference in cost between the highest and lowest activity levels is divided by the difference in activity levels.High level: 90,000 miles with a total cost of $260,000Low level: 50,000 miles with a total cost of $160,000Difference in cost = $260,000 - $160,000 = $100,000Difference in miles = 90,000 - 50,000 = 40,000 milesVariable cost per mile = $100,000 / 40,000 miles = $2.50 per mileTo find the fixed cost, subtract the total variable cost at either the high or low level from the total cost at that level. Using the high level for calculation:Total variable cost at high level = 90,000 miles * $2.50 = $225,000Fixed cost = Total cost at high level - Total variable cost at high level = $260,000 - $225,000 = $35,000

In Applying the High-Low Method What Is the Fixed Cost