Exercise 19-7

Cost Behavior and Cost-Volume-Profit Analysis Warren / Reeve / Duchac Exercise 19-7 solution

High-low method
Shatner Inc. has decided to use the high-low method to estimate the total cost and the fixed and variable cost components of the total cost. The data for various levels of production are as follows:


1. Determine the variable cost per unit and the fixed cost.

Variable cost: $16 per unit
Total fixed cost: $480,000

2. Based on part 1, estimate the total cost for 10,000 units of production.

Total cost for 10,000 units: $640,000