Question:

(a) The following output levels and production costs have been recorded over the last three periods:

Required:

Using the high-low method, estimate the:
(i) variable costs per unit;
(ii) total fixed costs per period;
(iii) total costs that would be incurred in a period at an output of 8,500 units.

(b) A company is launching a new product. The variable cost of the product is $4.50 per unit and fixed costs total $21,000 per period. The initial selling price is to be set by adding a mark-up of 10% to total unit cost based on estimated sales of 6,000 units per period. The company does not hold any inventory.

Required:  Calculate the initial selling price of the product.