(Appendix 5A) Inspection costs at one of Ratulowski Corporation's factories are listed below:
Management believes that inspection cost is a mixed cost that depends on units produced.
-Using the high-low method,the estimate of the fixed component of inspection cost per month is closest to:
A) $10,344
B) $10,441
C) $3,852
D) $10,176

Question

(Appendix 5A) Inspection costs at one of Ratulowski Corporation's factories are listed below:
  Management believes that inspection cost is a mixed cost that depends on units produced.
-Using the high-low method,the estimate of the fixed component of inspection cost per month is closest to:
A) $10,344 
B) $10,441 
C) $3,852 
D) $10,176

Quizplus · Accepted Answer

11ea7761_1889_8553_81a5_f57e6fd8c264_TB2580_00 Variable cost per unit = Change in cost ÷ Change in activity
= $619 ÷ 76 units
= $8.14 per unit
Total fixed cost = Total cost - Variable cost element
= $10,795 - ($8.14 per unit × 853 units)
= $10,795 - $6,943
= $3,852

(Appendix 5A) Inspection Costs at One of Ratulowski Corporation's Factories