Month
March
April
May
June
Units
430
545
440
550
Labor Cost
2880
3150
2920
3360
VC
4*430 = 1720
4*545 = 2180
4*440 = 1760
4*550 = 2200
FC
2880 – 1720 = 1160
3150 – 2180 = 970
2920 – 1760 = 1160
3360 – 2200 = 1160
Management anticipate production of 700 units in July. Determine the projected total cost at 700 units.
*** according to the YouTube, you will only use the high low method to the highest activity level, and
then the lowest activity level both in units in labor cost. that way we can identify either it is a fixed
component or a variable component.
*** in here we will use the cost equation.
Y = a+bx
remember, the Y is the total cost. The A is the fixed cost. The B is the variable cost per unit. And X is the
cost drivers.
Y = 1,160 + 4(x)
Y = 1,160 + 4(700)
Y = 3,960