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    High-Low Profit Equation

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    PROBLEM P4-9 - High-Low, Profit Equation
    Rhetorix, Inc. produces stereo speakers. Each unit (a pair of speakers) sells for $900 Below is
    information on production/sales and costs for 2010.

    "Production and
    Sales in Units" "Production
    Costs" "Selling and
    Admin. Costs"
    January 105 $88,860 $23,570
    February 117 97,600 25,200
    March 97 83,007 22,495
    April 106 89,600 23,720
    May 115 96,200 24,950
    June 125 103,500 26,250
    July 128 105,670 26,690
    August 132 108,550 27,200
    September 138 112,978 28,030
    October 126 104,200 26,400
    November 124 102,750 26,150
    December 108 91,050 23,990
    Total 1,421 $1,183,965 $304,645
    Average cost per unit $833.19141 $214.38776

    Required

    a. Use the high-low method to identify the fixed and variable cost components for both production costs and selling and administrative costs.

    b. The company estimates that production and sales in 2011 will be 1,550 units. Based on this estimate, forecast income before taxes for 2011.

    © BrainMass Inc. brainmass.com June 4, 2020, 2:38 am ad1c9bdddf
    https://brainmass.com/business/finance/high-low-profit-equation-471094

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    Solution Preview

    Please see Excel attachment for full solution.

    a. High low method
    production costs
    variable costs per unit=(difference in costs/difference in unit)
    731
    therefore fixed costs
    total ...

    Solution Summary

    The solution examines the high-low and profit equations. It assists with identifying the fixed and variable cost components for both production costs and selling and administrative costs.

    $2.19

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