A company is estimating its costs based on past information. The total costs incurred by the company at different levels of output were as follows:

The company uses the high-low method to separate total costs into their fixed and variable elements. Ignore inflation.

(a) The estimated total costs for an output of 205000 units is:
(i) $2870000 (ii) $3050000 (iii) $3064211 (iv) $3080857 (2 marks)
The company has now established that there is a stepped increase in fixed costs of $30000 when output reaches 180000 units.

(b) The estimate of total costs for an output of 175000 units using the additional information is:
(i) $2645000 (ii) $2275000 (iii) $2615000 (iv) $2630000 (2 marks)
CIMA P71 Performance Operations

Transcribed Image Text:

Output (units) Total costs ($) 160000 2420000 185000 2775000 190000 2840000