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The Salvage Company

The Salvage Company incurred the following costs for the month of August when it observed an activity level of 10,000 units.

Activity level in units --------- 10,000
Variable Costs ----------------- $30,000
Fixed Costs -------------------- $50,000
Mixed Costs -------------------- $40,000
Total Costs -------------------- $120,000

During October, the activity level was 16,000 units, and the total costs incurred were $150,000.

1) What are the variable costs, fixed costs, and mixed costs incurred during October?

2) Use the high-low method to calculate the cost formula for mixed costs.

3) If the activity level were expected to be 13,800 units for the month of December, what amount of total costs would be expected?

Solution Preview

The Salvage Company incurred the following costs for the month of August when it observed an activity level of 10,000 units.

Activity level in units --------- 10,000
Variable Costs ----------------- $30,000 = (30,000/10,000 = 3/unit)
Fixed Costs -------------------- $50,000
Mixed Costs -------------------- $40,000
Total Costs -------------------- ...

Solution Summary

This solution is comprised of a detailed explanation to answer what are the variable costs, fixed costs, and mixed costs incurred during October.

$2.19