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    Tricia_Ng's Avatar
    Tricia_Ng Posts: 1, Reputation: 1
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    #1

    Nov 23, 2010, 10:51 PM
    High low method
    do you know how to solve this question?
    An organisation has the following total costs at two activity levels:

    Activity level (units) 15,000 24,000
    Total costs $380,000 $470,000

    Variable cost per unit is constant in this activity range but there is a step up of $18,000 in the total costs when the activity exceeds 20,000 units.

    What are the total costs at an activity level of 18,000 units?
    jaynelin's Avatar
    jaynelin Posts: 1, Reputation: 1
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    #2

    Jan 16, 2011, 01:08 AM
    VCPU=($470,000-$180,000)-$380,000 / 24000 - 15000 units
    =$8/unit
    FC=$380,000-($8*15000 units)
    =$260,000
    TC@18000 units=$260,000+($8*18000 units)
    =$404,000
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