Relevant Range and High-Low Method The following selected data relate to the maj

Question

Relevant Range and High-Low Method The following selected data relate to the major cost categories experienced by Sterling Company at varying levels of operating volumes. Assuming that all operating volumes are within the relevant range, calculate the appropriate costs in each column in which blanks appear: Total Cost (@ 5,000 Units) Total Cost(Variable Cost Total Fixed Total Cost (@ 6,000 units) per Unit Cost 7,000 units) Direct labor (variable) $60,000 $72,000 $ Factory supervision (semi-variable) 20,000 22,000 $ Factory depreciation (fixed) 18,000 18,000 $ Check

Explanation / Answer

Total cost@5000 units Total cost@6000 units Variable cost per unit Total fixed cost Cost@7000 units Direct labor 60000 72000 12 84000 Factory supervision 20000 22000 2 10000 24000 Depreciation 18000 18000 18000 18000 Calculation of variable cost per unit from semi variable cost = Change in Cost/Change in number of units $22000-$20000/6000-5000 = 2000/1000 = 2 per unit Total fixed cost = $22000 - 6000*2 = $10000

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