Question
EX 21-7 HIGH-LOW METHOD Tashiro Inc. has decided to use the high-low method to estimate the total cost and the fixed and variable cost components
EX 21-7 HIGH-LOW METHOD
Tashiro Inc. has decided to use the high-low method to estimate the total cost and the fixed and variable cost components of the total cost. The data for various levels of production are as follows:
Units Produced Total Costs
60,000 $19,200,000
69,000 20,010,000
90,000 24,090,000
a. Determine the variable cost per unit and the total fixed cost.
b. Based on part (a), estimate the total cost for 86,000 units of production.
EX 21-8. HIGH-LOW METHOD FOR A SERVICE COMPANY
Boston Railroad decided to use the high-low method and operating data from the past six months to estimate the fixed and variable components of transportation costs. The activity base used by Boston railroad is a measure of railroad operating activity, termed "gross-ton miles," which is the total number of tons multiplied by the miles moved.
TRANSPORTATION COSTS GROSS-TON MILES
January $1,776,000 560,000
February 2,700,000 1,000,000
March 1,650,000 500,000
April 1,860,000 600,000
May 1,440,000 400,000
June 1,566,000 460,000
Determine the variable cost per gross-ton mile and the total fixed cost.
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