Choice "C" is correct. Using the high-low method, the variable cost per kilo can be determined by dividing the change in cost ($160,000 - $132,000) by the change in volume (80,000 - 60,000):
$160,000 - $132,000
80,000 - 60,000 | $1.40 per kilo |
The fixed portion of the cost can be determined by substituting the volume and variable in the equation Y+ bx, or
Y+ bx |
$160,000+ $1.40(80,000) |
a$48,000 |
At 75,000 kilos, the total cost would be:
Y$48,000 + $1.40x |
Y$48,000 + $1,40(75,000) |
Y$153,000 |
Choices "a", "d", and "b" are incorrect. Using the high-low method, the variable cost per kilo can be determined by dividing the change in cost by the change in volume. The fixed portion of the cost can be determined by substituting the volume and the variable in the equation Y+ bx.
