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Unformatted text preview: d Costs:
High–Low Method Example
Data for Metro Transit Company for 4 month period: High Level of Activity:
Low Level of Activity:
Difference April January
$33,000 50,000 miles
30,000 miles Step 1: Using the formula, variable costs per unit are:
$33,000 ÷ 30,000 miles = $1.10 variable cost per mile.
5-19 Mixed Costs:
Step 2: Determine the fixed costs by subtracting total
variable costs at either the high or low activity
level from the total cost at that same level. Chapter
$8,000 per month plus $1.10 per mile.
To determine maintenance costs at a particular
activity level: 1. 2. Multiply the activity level times the
variable cost per unit,
Then add that total to the fixed cost. EXAMPLE: If the activity level is 45,000 miles, the estimated maintenance costs would be $8,000 fixed
costs and $49,500 variable ($1.10 × 45,000 miles)...
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- Winter '14