The manufacturing costs of Calico Industries for three months of the year are provided below.

Total Cost Production Units

April $120,000 280,000

May 74,000 165,000

June 90,900 230,000

Using the high-low method, the variable cost per unit and the total fixed costs are:

a) $0.78 per unit and $4,000.

b) $0.40 per unit and $8,000.

c) $4.00 per unit and $800.

d) $7.80 per unit and $4,000.

b) $0.40 per unit and $8,000.

Explanation:

The computation of the high-low method, the variable cost per unit and the total fixed costs is given below:-

Total Cost Production Units

April $120,000 280,000

May $74,000 165,000

June $90,900 230,000

Using High Low method

Variable Cost per unit = (High Cost - low Cost) : (High Cost Units - low Cost Units)

= ($120,000 - $74,000) : (280,000 - 165,000)

= $46,000 : 115,000

= $0.40

Fixed Cost = Total Cost - Variable Cost per unit * Production unit

= $120,000 - $0.40 * 280,000

= $8,000