ScholarMatic: Explanation & Answer
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Biblio Files Company is the chief competitor of Cover-to-Cover
Company in the bookshelf business. Biblio Files is analyzing its
manufacturing costs, and has compiled the following data for the
first six months of the year. After reviewing the data, answer
questions (1) through (3) below.
|
Month |
Number of Units Produced |
Total Cost |
|---|---|---|
| January | 4,360 | $65,600 |
| February | 275 | $6,250 |
| March | 1,000 | $15,000 |
| April | 4,775 | $73,750 |
| May | 1,750 | $32,500 |
| June | 3,015 | $48,000 |
1. From the data provided above, help Biblio Files Company
estimate the fixed and variable portions of its total costs using
the High-Low Method. Recall that Total Costs = (Variable Cost Per
Unit x Units Produced) + Fixed Cost.
Points:
1 / 2
2. With your Total Fixed Cost and Variable Cost per Unit from
the High-Low Method, calculate the total cost for the following
values of N (Number of Units Produced).
| Number of Units Produced | Total Costs |
| 3,500 | |
| 4,360 | |
| 4,775 |
Points:
0 / 3
3. Why does the total cost calculated for 4,360 units not match
the data for January in the table at the top of this panel?
The High-Low method gives a formula for the estimated total cost
and may not match levels of production other than the highest and
lowest.
The High-Low method is accurate only for months in which
production is at full capacity.
The High-Low method only gives accurate data when fixed costs
are zero.
The High-Low method gives accurate data only for levels of
production outside the relevant range.
ScholarMatic: Explanation & Answer
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