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The following data relate to the number of units produced and their corresponding total costs
Units produced Total costs incurred
If the production level exceeds 40.000 units, fixed costs increase by 25% while variable cost per
unit decreases by 10%. Using the High – Low method; calculate the total costs if 47.000 units
Can you help me to solve this problem
As I wrote in reply to your other question, please do not simply type out a full question and expect to be provided with a full answer. Ask about whatever it is in the printed answer that you are not clear about.
The easiest way to solve this is to use a bit of elementary algebra.
Suppose that at levels below 40,000, the fixed cost if F and the variable cost is V per unit.
Then at the 30,000 level we get: F + 30,000V = 230,000,
and at the 59,000 level we get: 1.25F + 59,000 x 0.9V = 365,500
Solving these 2 equations will give you the values of V and F at levels below 40,000. For 47,000 units, increase F by 25% and reduce V by 10%.