Fulton and Sons, Inc. presently leases a copy machine under an agreement that calls for a fixed fee each month and a charge for each copy made. Fulton made 16,000 copies and paid a total of $630 in March; in May, the firm paid $600 for 14,000 copies. The company uses the high-low method to analyze costs.

Solution:

Given,

Fulton made 16,000 copies

Paid a total of $630 in March

Firm paid $600 for 14,000 copies

The variable cost per unit is (High - Low costs) : (High - Low Units)

= ($630 - $600) : (16,000 - 14,000) = $0.015 per copy.

Variable costs (using the low level) = 14,000 * $0.015 = $210;

Total costs - variable costs = fixed costs

(or $600 - $210 = $390) Units * Variable cost per unit + Fixed costs

= (12,000 * $0.015) + $390 = $570.00.