Lindsay Company had utilities cost of $105,000 at an output level of 30,000 units. The utilities cost was a mixed cost, and the fixed portion was $60,000. What would be the best estimate of total utilities cost at an output level of 50,000 units?
A) $50,000
B) $110,000
C) $125,000
D) $135,000

Question

Quizplus · Accepted Answer

First, we need to calculate the variable portion of the mixed cost using the high-low method:

Variable cost = Total cost at high output - Total fixed cost 
Variable cost = $105,000 - $60,000 = $45,000

Then, using the formula for a mixed cost, we can estimate total utilities cost at a different output level:

Total cost = Fixed cost + (Variable cost per unit x Output level)

Total cost = $60,000 + ($45,000/30,000 units) x 50,000 units

Total cost = $60,000 + $75,000

Total cost = $135,000

Therefore, the best estimate of total utilities cost at an output level of 50,000 units is $135,000.

Lindsay Company Had Utilities Cost of $105,000 at an Output