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Costs for Riddle Co.

Hello, I need help figuring out the missing amount and to arrive at the answers.

The following data have been extracted from the records of Riddle Co.:

July December
Production level, in units........................................... 5,000 10,000
Variable Costs......................................................... $12,000 $ ?
Fixed Costs.............................................................. ? 18,000
Mixed Costs............................................................ 10,000 ?
Total Costs.............................................................. $40,000 59,000
¬Required:
a. Calculate the missing costs.
b. Calculate the cost formula for mixed cost using the high-low method.
c. Calculate the total cost that would be incurred for the production of 8,000 units.
d. Identify the two key costs behavior assumptions made in the calculation of your answer to part c.

Solution Preview

a.
Since per unit cost in July is 12000/5000=2.4, variable cost in December is 2.4*10000=$24,000

Since fixed cost does not chance from July to December, fixed cost in July is still $18,000

Mixed cost in December=total cost-variable cost-mixed cost=59000-24000-18000=$17,000

So the complete table is
July December ...

Solution Summary

The solution gives detailed steps on calculating cost using high-low method and identifying the two key costs behavior assumptions.

$2.19