Markowis Corp. has collected the following data concerning its maintenance costs for the past 6 months.

Units Produced Total Cost

July 18,000 $36,000

August 32,000 48,000

September 36,000 55,000

October 22,000 38,000

November 40,000 74,500

December 38,000 62,000

Required:

Compute the variable and fixed cost elements using the high low method.

Variable cost per unit = $1.75

Fixed costs = $4,500

Explanation:

Giving the following information:

Units Produced Total Cost

July 18,000 $36,000

August 32,000 48,000

September 36,000 55,000

October 22,000 38,000

November 40,000 74,500

December 38,000 62,000

To calculate the variable and fixed costs under the high-low method, we need to use the following formulas:

Variable cost per unit = (Highest activity cost - Lowest activity cost) / (Highest activity units - Lowest activity units)

Variable cost per unit = (74,500 - 36,000) / (40,000 - 18,000)

Variable cost per unit = $1.75

Fixed costs = Highest activity cost - (Variable cost per unit * HAU)

Fixed costs = 74,500 - (1.75*40,000)

Fixed costs = $4,500

Fixed costs = LAC - (Variable cost per unit * LAU)

Fixed costs = 36,000 - (1.75*18,000)

Fixed costs = $4,500