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    tkelly1271's Avatar
    tkelly1271 Posts: 2, Reputation: 1
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    #1

    Apr 24, 2011, 10:28 AM
    Recompute the fixed costs, variable cost and the BEP using the high low method.
    Info is :
    Month Meals Served Total Costs
    July 3,500 $20,500
    August 4,000 22,600
    September 4,200 23,350
    October 4,600 24,500
    November 4,700 25,000
    December 4,900 26,000

    I have gotten the fixed costs as $4.29.
    26500-20500/4900-3500 = 6000/1400 = 4.29

    I am not able to find the variable costs.
    20500-3500*4.29 = 20500-15015=5485
    26000-4900*4.29 = 26000-21021=4979

    THIS DOES NOT EQUAUL SO I KNOW I AM WRONG, PLEASE HELP!
    Just Looking's Avatar
    Just Looking Posts: 1,610, Reputation: 480
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    #2

    Apr 24, 2011, 11:40 AM

    You have a couple of mistakes here. In your first equation, you are using 26,500 when you want 26,000. The resulting number will be your variable costs per unit, not your fixed costs. Variable costs are those that change with the amount of product produced in proportion to the product produced, while fixed costs remain constant.
    tkelly1271's Avatar
    tkelly1271 Posts: 2, Reputation: 1
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    #3

    Apr 24, 2011, 02:07 PM
    Comment on Just Looking's post
    I just noticed that... thank you. This assignment has had me so confused all week I have a million typos, I do apologize.
    Just Looking's Avatar
    Just Looking Posts: 1,610, Reputation: 480
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    #4

    Apr 24, 2011, 02:27 PM

    No problem. It was great to see someone who had shown their work, and after being in accounting for the last 10+ years (including school) I understand how easy it is to make those little mistakes.
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