Felix & Company reports the following information.

 Felix & Company reports the following information.
 

Period    Units Produced    Total Costs
1    0    $ 2,500
2    400    3,100
3    800    3,700
4    1,200    4,300
5    1,600    4,900
6    2,000    5,500
7    2,400    6,100
8    2,800    6,700
9    3,200    7,300
10    3,600    7,900
(1) Use the high-low method to estimate the fixed and variable components of total costs.
(2) Estimate total costs if 3,000 units are produced.

 

Explanation
1.
Using the high-low method results in variable costs per unit of:

Cost of highest volume − Cost at lowest volume / Highest volume − Lowest volume = $7,900 − $2,500 / 3,600 − 0 = $5,400 / 3,600 = $1.50 per unit

Fixed costs = Total costs − (Variable costs per unit × Number of units)
Using results at the highest volume to solve for fixed costs
= $7,900 − ($1.50 × 3,600) = $2,500
Or, using results at the lowest volume to solve for fixed costs
= $2,500 − ($1.50 × 0) = $2,500

2.
If 3,000 units are produced, the estimated total cost is:
$2,500 + ($1.50 per unit × 3,000 units) = $7,000

Thanks