Reference no: EM132973269

A company is estimating its costs based on past information. The total costs incurred by the company at different levels of output were as follows:

Output              Total costs

(units)                  £

160,000       2,420,000

185,000           2,775,000

190,000          2,840,000

The company uses the high-low method to separate total costs into their fixed and variable elements. Ignore inflation.

Problem 1: The estimated total costs for an output of 205,000 units is:

Select one:

A. £2,870,000

B. £3,050,000

C. £3,064,211

D. £3,080,857

Problem 2: The company has now established that there is a stepped increase in fixed costs of £30,000 when output reaches 180,000 units. The estimated total cost for an output of 175,000 units is:

Select one:

A. £2,625,000

B. £2,275,000

C. £2,615,000

D. £2,660,000