Shatner inc .has decided to use the high-low method to estimate the

We can use these numbers to calculate the variable cost per unit by subtracting the fixed cost from the total cost at each level of production. For example, for 7,500 units produced: Fixed Cost = 600,000 – (7,500 x Variable Cost) = 600,000 – (7,500 x X) = 600 000 – X(7 500). By rearranging this equation we can solve for X which gives us Variable Cost per Unit = (600 000/7500) = $80/unit.

Similarly for 12 500 Units: Fixed Cost = 725 000 – (12 500 x Variable Cost) or Fixed Cost=725 000 – (12 500 x 80)=725 00-950000=225000. Therefore we can conclude that Fixed Costs are $225 000 in this case.

Finally using 20 000 Units: Variable Cost Per Unit=(800000-225000)/20000=$37.5/Unit

Therefore using High Low Method we determined that variable costs per unit are $80/unit while fixed costs are estimated at $225 000