The Smith Company has accumulated the following data concerning a mixed cost. The company is using the units produced as the activity level.
Units Produced Total Cost
August 10,000 $14,940
September 8,600 $13,450
October 7,100 $11,200
November 7,700 $12,200
December 8,200 $12,660
1. Using the high-low method, compute the variable and fixed cost elements.
2. If the company produces 8,000 units, estimate the total cost.
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Smith Company: Behavior of Costs
Costs can be classified into variable and fixed. Costs are said to be variable if they vary in total relative to a cost driver such as machine hours, direct labor hours, etc. on the other hand, costs are said to be fixed if these costs, in total, do not change relative to the identified ...
This solution involves compute Smith Company's variable and fixed costs using the high-low method. The expert estimates the total cost.