Using High-low method

Well, that 100,000 is the Variable Cost of that activity level. You know that Total Cost consists of a fixed element & a variable element. Since you’ve already (and rightly) calculated the fixed cost (which includes a share of Stepped Fixed Cost as well), the remaining element must be and is the Variable Cost. Let me show you the proper workings for this question:

VC/Unit = (Cost of Highest Activity Level – Cost of Lowest Activity Level)/(Highest Activity Level – Lowest Activity Level)
Since there’s an element of SFC in the Highest AL cost, so we’ll have to first remove it from the cost in order to get the amount that contains same Fixed Cost as that in the Lowest AL.
SFC applies after every 17,500 units, that means 22,000 units will have a SFC of $5,000 only. (A further $5,000 will add up if AL reaches 35,000 units)

So, the Total Cost of 22,000 units excluding SFC of $5,000 will be:
170,000-5000 = $165,000

VC/Unit = (165,000-135,000)/(22,000-16,000) = 30,000/6,000
VC/Unit = $5

For Lowest AL:
TFC = TC-TVC = TC-(VC/Unit x AL)
TFC = 135,000-(5 x 16,000) = 135,000 – 80,000 = 55,000

For Highest AL:
(it includes SFC as well)
TC = TVC + TFC + SFC = (5×22,000) + 55,000 + 5,000
TC = 110,00+60.000 = $170,000 (verified)

For AL 20,000:
TC = (5 x 20,000) + 55,000 + 5,000 = 100,000 + 60,000
TC = $160,000

Hope it helped you.

@chizzy4real said:
Thanks @ secondstar.its really help. God bless you.

You’re Welcome… 🙂