Presented below is the production data for six months of the year showing the mi
ID: 2418762 • Letter: P
Question
Presented below is the production data for six months of the year showing the mixed costs incurred by Swift Company.
MONTH
COST
UNITS
July
$12,000
3,000
August
$12,500
3,250
September
$15,000
4,000
October
$14,250
3,750
November
$20,000
5,500
December
$18,000
5,000
Swift Company uses the high-low method to analyze mixed costs. The predicted total cost at an operating level of 15,000 units is __________.
You must show all of your calculations.
MONTH
COST
UNITS
July
$12,000
3,000
August
$12,500
3,250
September
$15,000
4,000
October
$14,250
3,750
November
$20,000
5,500
December
$18,000
5,000
Explanation / Answer
High sales=5,500 units
low sales=3,000 units
so variable cost=($20,000-$12,000)/(5,500-3,000)=$8,000/2,500=$3.2 per unit
Fixed cost =$12,000-3,000*3.2=$2,400
total cost for 15,000 units=$15,000*3.2+$2,400=$50,400