The following data has been assembled for Arnold Company.Use the high-low method.
$\begin{array}{lll}
\text { Month }&\text { Cost }&\text { Hours: }\
\text { January } & \$ 24,000 & 2,000 \
\text { February } & \$ 39,000 & 2,200 \
\text { March } & \$ 35,280 & 2,750 \
\text { April } & \$ 36,400 & 3,500 \
\text { May } & \$ 40,000 & 4,000
\end{array}$
The total fixed cost is ________.
A) $3,600
B) $8,000
C) $21,360
D) $26,672

Question

Quizplus · Accepted Answer

The high-low method involves identifying the highest and lowest levels of activity and their associated costs to determine the variable cost per unit and the fixed cost. The variable cost per unit is calculated as the change in cost divided by the change in activity level. From the data:- Highest activity level: May with 4,000 hours and a cost of $40,000.- Lowest activity level: January with 2,000 hours and a cost of $24,000.Change in cost = $40,000 - $24,000 = $16,000.Change in hours = 4,000 - 2,000 = 2,000 hours.Variable cost per unit = Change in cost / Change in hours = $16,000 / 2,000 = $8 per hour.To find the total fixed cost, we can use any of the data points. Using January's data:Total cost = Variable cost + Fixed cost.$24,000 = ($8 * 2,000) + Fixed cost.$24,000 = $16,000 + Fixed cost.Fixed cost = $24,000 - $16,000 = $8,000.

The Following Data Has Been Assembled for Arnold Company The Total Fixed Cost Is ________