Al-Firdaus Co. had the following information during 2019: Total Paint Costs R.O. 27,000 Month Factory Machine Hours January 15,900 February 24,200 17,400 March 24,300 16,600 April 27,100 15,600 May 24,400 17,600 June 27,200 16,400 Using the High-Low method, the total fixed costs is: Select one: О а. 600 O b. 800 O . None of the answers are correct O d. 1,200 O e. 1,600

Principles of Accounting Volume 2
19th Edition
ISBN:9781947172609
Author:OpenStax
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Chapter2: Building Blocks Of Managerial Accounting
Section: Chapter Questions
Problem 9EA: The cost data for Evencoat Paint for the year 2019 is as follows: Using the high-low method, express...
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Al-Firdaus Co. had the following information during 2019:
Total Paint Costs
R.O. 27,000
Month
Factory Machine Hours
January
15,900
February
24,200
17,400
March
24,300
16,600
April
27,100
15,600
May
24,400
17,600
June
27,200
16,400
Using the High-Low method, the total fixed costs is:
Select one:
О а. 600
O b. 800
O . None of the answers are correct
O d. 1,200
O e. 1,600
Transcribed Image Text:Al-Firdaus Co. had the following information during 2019: Total Paint Costs R.O. 27,000 Month Factory Machine Hours January 15,900 February 24,200 17,400 March 24,300 16,600 April 27,100 15,600 May 24,400 17,600 June 27,200 16,400 Using the High-Low method, the total fixed costs is: Select one: О а. 600 O b. 800 O . None of the answers are correct O d. 1,200 O e. 1,600
Expert Solution
Step 1

High- Low mentod is a way to separate out fixed cost and variable cost. In this method we select highest level of activity and lowest level of activity and compare the total cost at each level.

first we determine Variable cost component :

Highest Activity Cost -  Lowest Activity Cost/Highest Activity Units - Lowest Activity Units

Now determit fixed cost component = Highest Activity Cost- (Variable cost*Highest Activity Units )

 

Now we can compare to calculate high low cost = Fixed Cost + (Variable cost * Unit Activity)

 

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