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View Full Version : Recompute the fixed costs, variable cost and the BEP using the high low method.


tkelly1271
Apr 24, 2011, 10:28 AM
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
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
Apr 24, 2011, 02:07 PM
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
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.