To follow is information about the units produced and total manufacturing costs for Snow Enterprises for the past six months.

-Using the high-low method, what will the total monthly manufacturing costs be if Snow Enterprises produces 7,500 units?
A) $3,915
B) $5,790
C) $1,875
D) $3,860

Question

To follow is information about the units produced and total manufacturing costs for Snow Enterprises for the past six months.
 
-Using the high-low method, what will the total monthly manufacturing costs be if Snow Enterprises produces 7,500 units?
A) $3,915 
B) $5,790 
C) $1,875 
D) $3,860

Quizplus · Accepted Answer

To use the high-low method, we need to calculate the variable cost per unit first.

Highest level of production (in units): 10,000 
Total manufacturing costs at the highest level of production: $54,600

Lowest level of production (in units): 5,000 
Total manufacturing costs at the lowest level of production: $39,600

Change in cost: $54,600 - $39,600 = $15,000 
Change in production: 10,000 - 5,000 = 5,000

Variable cost per unit = $15,000 ÷ 5,000 units = $3 per unit

Now, we can use this variable cost per unit to calculate the total manufacturing costs at 7,500 units:

Total manufacturing costs = ($3 per unit × 7,500 units) + fixed costs 
Total manufacturing costs = $22,500 + $3,290 
Total manufacturing costs = $25,790

Therefore, the answer is B.

To Follow Is Information About the Units Produced and Total