High-Low 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) that follow. Units Produced Total Cost 4,360 units $65,600 300 6,250 15,000 156,250 32,500 48,000 1. From the data previously provided, 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 Number of Units Produced) + Fixed Cost. Complete the following table. Total Fixed Cost Variable Cost per Unit January February March April May June 1,000 7,800 1,750 3,015 20 ✔ 2. With your Total Fixed Cost and Variable Cost per Unit from the high-low method, compute the total cost for the following values of N (Number of Units Produced). Number of Units Produced Total Cost 3,500 4,360 7,800 3. Why does the total cost computed for 4,360 units not match the data for January? a. The high-low method is accurate only for months in which production is at full capacity. b. The high-low method only gives accurate data when fixed costs are zero. c. 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. d. The high-low method gives accurate data only for levels of production outside the relevant range. $ X X
High-Low 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) that follow. Units Produced Total Cost 4,360 units $65,600 300 6,250 15,000 156,250 32,500 48,000 1. From the data previously provided, 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 Number of Units Produced) + Fixed Cost. Complete the following table. Total Fixed Cost Variable Cost per Unit January February March April May June 1,000 7,800 1,750 3,015 20 ✔ 2. With your Total Fixed Cost and Variable Cost per Unit from the high-low method, compute the total cost for the following values of N (Number of Units Produced). Number of Units Produced Total Cost 3,500 4,360 7,800 3. Why does the total cost computed for 4,360 units not match the data for January? a. The high-low method is accurate only for months in which production is at full capacity. b. The high-low method only gives accurate data when fixed costs are zero. c. 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. d. The high-low method gives accurate data only for levels of production outside the relevant range. $ X X
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Subject:- Accounting
Transcribed Image Text:High-Low
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) that follow.
Units Produced
Total Cost
4,360 units
$65,600
300
6,250
1,000
15,000
7,800
156,250
1,750
32,500
48,000
3,015
1. From the data previously provided, 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 Number of Units Produced) + Fixed Cost. Complete the following table.
Total Fixed Cost
Variable Cost per Unit
January
February
March
April
May
June
20 ✔
2. With your Total Fixed Cost and Variable Cost per Unit from the high-low method, compute the total cost for the following values of N (Number of
Units Produced).
Number of
Units Produced
C
Total Cost
3,500
4,360
7,800
3. Why does the total cost computed for 4,360 units not match the data for January?
a. The high-low method is accurate only for months in which production is at full capacity.
b. The high-low method only gives accurate data when fixed costs are zero.
c. 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.
d. The high-low method gives accurate data only for levels of production outside the relevant range.
$
X
X
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