High-low Method Practice (not a graded item, answers at end):

The Hilo Pineapple Producers? total overhead costs contain both fixed and variable costs. Therefore the overhead costs are considered mixed costs.

Costs and activity levels were determined to be:

Month Pineapple Harvester Hours of Operation Total Overhead Costs

Jan	16,000	$160,000
Feb	18,250	178,000
Mar	23,000	217,000
Apr	19,000	180,000
May	17,500	172,000
Jun	20,000	185,000
Jul	25,000	232,000
Aug	21,000	200,000

• Determine the cost formula for the overhead costs using the high low method so that fixed and variable costs may be segregated.

• Predict the total cost for September if 22,100 harvester hours are anticipated.

Hints/Help

• High-low method:

High Level - Low Level

Total Overhead Costs ........

Pineapple Harvester Hours

Variable Cost =	Change in Cost ($)	=	$ for high activity level - $ for low activity level
Per unit	Change in Activity		high activity level ? low activity level

y = m x + b

total cost variable cost per unit level of activity in units + fixed cost

V a r i a b l e C o s t

At the High level:	Y	=	mx	+	b
At the Low level:	Y	=	mx	+	b

The high level and low level equations should produce the same fixed cost (b)

• Plug in 22,100 harvester hours for the level of activity (x)

Check your answers at the bottom of the page in light gray. If you cannot get the right answer, email your work to the instructor for assistance.

• Your fixed cost should be $32,000. The equation is y = $8x + 32,000.
• $208,800 total cost

High-low Method Practice (not a graded item, answers at end): The Hilo Pineapple Producers' total overhead costs contain both fixed and variable costs. Therefore the overhead costs are considered mixed costs. Costs and activity levels were determined to be: Month Jan Feb Mar Apr May Jun Jul Aug Pineapple Harvester Hours of Operation 16,000 18,250 23,000 19,000 17,500 20,000 25,000 21,000 Total Overhead Costs $160,000 178,000 217,000 180,000 172,000 185,000 232,000 200,000 1) Determine the cost formula for the overhead costs using the high low method so that fixed and variable costs may be segregated. 2)Predict the total cost for September if 22,100 harvester hours are anticipated. Hints/Help 1) High-low method: High Level - Low Level Total Overhead Costs ........ Pineapple Harvester Hours Variable Cost = Per unit Change in Cost ($) Change in Activity y = total cost activity in units $ for high activity level - $ for low activity level high activity level - low activity level m x variable cost per unit + fixed cost V At the High level: = Y = a r i mx a b l + + b level of e C o s t b At the Low level: Y = mx + b The high level and low level equations should produce the same fixed cost (b) 2) Plug in 22,100 harvester hours for the level of activity (x) Check your answers at the bottom of the page in light gray. If you cannot get the right answer, email your work to the instructor for assistance. 1. Your fixed cost should be $32,000. The equation is y = $8x + 32,000. 2. $208,800 total cost High-low Method Practice (not a graded item, answers at end): The Hilo Pineapple Producers' total overhead costs contain both fixed and variable costs. Therefore the overhead costs are considered mixed costs. Costs and activity levels were determined to be: Month Jan Feb Mar Apr May Jun Jul Aug Pineapple Harvester Hours of Operation 16,000 18,250 23,000 19,000 17,500 20,000 25,000 21,000 Total Overhead Costs $160,000 178,000 217,000 180,000 172,000 185,000 232,000 200,000 1) Determine the cost formula for the overhead costs using the high low method so that fixed and variable costs may be segregated. 2) Predict the total cost for September if 22,100 harvester hours are anticipated. Hints/Help 1) High-low method: High Level Total Overhead Costs ........ Pineapple Harvester Hours Variable Cost = Per unit y total cost _____ _____ Change in Cost ($) Change in Activity = = - Low Level _____ _____ $ for high activity level - $ for low activity level high activity level - low activity level m variable cost per unit x level of activity in units V a r i a b l e At the High level: Y = mx + + fixed cost C o s t + b At the Low level: Y = mx + b The high level and low level equations should produce the same fixed cost (b) 2) Plug in 22,100 harvester hours for the level of activity (x) b Check your answers at the bottom of the page in light gray. If you cannot get the right answer, email your work to the instructor for assistance. 1. Your fixed cost should be $32,000. The equation is y = $8x + 32,000. 2. $208,800 total cost