Strait co. manufactures office furniture. during the most productive month of the year, 3,000 desks were manufactured at a total cost of $59,000. in the month of lowest production the company made 1,125 desks at a cost of $38,000. using the high-low method of cost estimation, total fixed costs are

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Business

Chaos

15 July, 16:05

Strait co. manufactures office furniture. during the most productive month of the year, 3,000 desks were manufactured at a total cost of $59,000. in the month of lowest production the company made 1,125 desks at a cost of $38,000. using the high-low method of cost estimation, total fixed costs are

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Sebastian · Answer 1

Using High-Low method:x 1 = 1,125 (low units), x 2 = 3,000 (high units) y 1 = 38,000 (low cost), y 2 = 59,000 (high cost). Formula is: y = m x + b, where b represents Fixed costs. m = (y2 - y1) / (x2 - x1) = (59,000 - 36,000) / (3,000 - 1,125) = 11.259,000 = 11.2 * 3,000 + bb = 59,000 - 33,600 = 25,400y = 11.5 x + 25,400Answer: Total fixed costs are $25,400.