Accounting: What the Numbers Mean 9th Edition by Wayne W McManus, Daniel F Viele, David H Marshall

Exercise 63

High-low method A department of Alpha Co. incurred the following costs for the month of September. Variable costs, and the variable portion of mixed costs, are a function of the number of units of activity:

Activity level in units	5,000
Variable costs	$10,000
Fixed costs	30,000
Mixed costs	20,000
Total costs	$60,000

During October the activity level was 8,000 units, and the total costs incurred were $70,500.

Required:

a.Calculate the variable costs, fixed costs, and mixed costs incurred during October.

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b. Use the high-low method to calculate the cost formula for mixed cost.

Step 1 of 12

Compute the fixed costs, variable costs and mixed costs experienced during October.

Variable cost:

The cost to the business or individual that differs over the duration of time depending on the number of factors.

Fixed costs:

Fixed cost is defined as the cost that does not change with sales, production, and other direct and indirect expenses.

Mixed costs:

Mixed cost is defined as a cost that includes both variable and fixed costs.