Answer:
Fixed expense = $279
Variable expense = $0.12 per unit
Explanation:
We know,
According to the high-low method, variable expense = [tex]\frac{highest cost - lowest cost}{highest activity - lowest activity}[/tex] per unit
Given,
Highest cost = $657
Lowest cost = $525
Highest activity = 3,150 miles
Lowest activity = 2,050 miles
Putting the values in the formula,
Variable expense = [tex]\frac{657 - 525}{3150 - 2050}[/tex]
= 132/1,100
Variable expense = $0.12 per unit
Taking the highest activity level, total variable expense = $0.12 per unit × 3,150 miles = $378
We know,
Total cost = Fixed expense + variable expense
Taking the highest activity level,
$657 = Fixed expense + $378
Fixed expense = $657 - $378
Fixed expense = $279
