Please explain how you got the answer. Thanks in advance! To follow is informati

Question

Please explain how you got the answer. Thanks in advance!

To follow is information about the units produced and total manufacturing costs for Pine Enterprises for the past six months. Month January February March April May June Number of units produced 8,000 7,500 6,600 6,800 4,400 7,000 Total manufacturing costs $6,500 $8,000 $7,550 $7,650 $4,000 $7,750 Using the high - low method, what will the total monthly manufacturing costs be if the company produces 9,200 units? (Round intermediary calculations to the nearest cent.) OA. $7,328 O B. $6,348 OC. $11,868 OD. $980

Explanation / Answer

A. $ 7,328

Working:

As per high-low metod, Variable cost per unit = (Total cost at high level-total cost at low level)/(High level-Low level) = (6500-4000)/(8000-4400) = $         0.69 At highest level, Total Cost         6,500 Less variable cost 8000*$ 0.69 =         5,520 Fixed Cost            980 So, Cost formula = a+by Where, a Fixed Cost $        980 b variable cost per unit $       0.69 y total units sold Now, cost of 9,200 units Total cost = a+by Where, = 980+0.69*9200 a Fixed Cost $        980 = $       7,328 b variable cost per unit $       0.69 y total units sold         9,200

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