The following information is available for a company's cost of sales over the last four months.MonthUnits soldCost of salesJanuary1,200$43,000February800$37,000March1,600$49,000April2,400$61,000Use the high-low method to estimate the fixed and variable components of the cost of sales.
What will be an ideal response?
Variable cost per unit = Change in cost/change in units (using highest and lowest level of activity)
($61,000 - $37,000)/(2,400 - 800) = $15.00 per unit
Fixed cost = Total high (low) cost - (variable cost per unit ? high (low) hours)
$61,000 - ($15 ? 2,400) = $25,000
OR $37,000 - ($15 ? 800) = $25,000
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