Hear Right Company has identified certain variable and fixed costs in the production of its hearing aid components. Management wants you to divide its mixed costs into its fixed and variable portions. Here are the high and low cost data for the firm:
Total
Month Units Costs ($'s)
February 20,000 85,500
October 40,000 120,300
a. Using the high-low method, determine the total amount of fixed costs and the amount of variable cost per unit. Show your work.
b. Assume the firm sells their hearing aid components at a sales price of $6.74 per unit. How many units must be sold for Hear Right to break even on its hearing components? Show your work.