FINC 577 Chapter 5 Notes Outline

Chapter 5 18 mixed mixed costs high highlow method

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: d Costs: High– High–Low Method Example Data for Metro Transit Company for 4 month period: High Level of Activity: Low Level of Activity: Difference April January January $63,000 30,000 $33,000 50,000 miles 20,000 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. $1.10 Chapter 5-19 Mixed Costs: High–LowHigh–Low-Method Example Step 2: Determine the fixed costs by subtracting total variable costs at either the high or low activity the level from the total cost at that same level. Chapter 5-20 Mixed Mixed Costs: High–LowHigh–Low-Method Example Maintenance costs: $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)...
View Full Document

{[ snackBarMessage ]}

Ask a homework question - tutors are online