Problem:
High-low method A department of Alpha Co. incurred the following costs for the month of September. Variable costs, and the variable portion of mixed costs, are a function of the number of units of activity:
Activity level in units. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000
Variable costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10,000
Fixed costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,000
Mixed costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000
Total costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $60,000
During October the activity level was 8,000 units, and the total costs incurred were $70,500.
Required:
Q1. Calculate the variable costs, fixed costs, and mixed costs incurred during October.
Q2. Use the high-low method to calculate the cost formula for mixed cost.