Question Content Area
Strait Co. manufactures office furniture. During the most productive month of the year, 3,500 desks were manufactured at a total cost of $83,800. In the month of lowest production, the company made 1,240 desks at a cost of $61,900. Using the high-low method of cost estimation, total fixed costs are

a.$21,900
b.$49,885
c.$61,900
d.$83,800

Sometimes production of a product may increase or decrease, but the cost which do not change with the change of output is called fixed cost of the product.

What is the total fixed cost ?

Highest monthly total cost = $83800

Highest monthly production units = 3500 desks

Lowest monthly total cost = $61900

Lowset monthly production units = 1240 desks

So, variable cost per unit = (Highest cost-lower cost)/(highest production units-lowest production units)

= ($83800-$61900)/(3500-1240)

= $21900/2260

= $9.7

∴ Total fixed costs=Highest monthly total cost-(highest production units×variable cost per unit)

= $83800-(3500×$9.7)

= $83800-$33950

= $49850

Nearest value is $49885, whch is the correct one.

Learn more about fixed cost here:

https://brainly.com/question/27328807

#SPJ10