T.L. Franklin Corporation has three costs: A, which is variable; B, which is fixed; and C, which is semivariable. The company uses the high-low method and extracted the following data from its accounting records: •At 180,000 hours of activity, Cost A totaled $2,610,000.•At 140,000 hours, the low point during the period, Cost C totaled $1,498,000; at 200,000 hours, the high point, Cost C's fixed portion amounted to $1.75 per hour.•At 160,000 hours of activity, the sum of Costs A, B, and C amounted to $8,162,000.Required: A. Compute the variable portion (total) of Cost C at 140,000 hours of activity.B. Compute Cost C (total) at 160,000 hours of activity.C. Compute Cost B (total) at 160,000 hours of activity.
What will be an ideal response?
A. Cost C's fixed portion will total the same amount, $350,000 (200,000 hours × $1.75), at both 200,000 hours and 140,000 hours. Thus, the variable portion of C at 140,000 hours will be $1,148,000 ($1,498,000 - $350,000).
B. The variable portion of Cost C is $8.20 per hour ($1,148,000 ÷ 140,000 hours). Cost C will therefore total $1,662,000 [(160,000 hours × $8.20) + $350,000].
C. At 160,000 hours, Cost A equals $2,320,000 [($2,610,000 ÷ 180,000 hours) × 160,000 hours]. Thus:
| Total cost (A + B + C) | ? | $8,162,000 |
| Less: Cost A | $2,320,000 | ? |
| Cost C | 1,662,000 | 3,982,000 |
| Cost B | ? | $4,180,000 |
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