Detailed Answer
Answer (D) is correct.
REQUIRED: The estimate of needed manufacturing supplies using the high-low method.
DISCUSSION: The fixed and variable portions of mixed costs may be estimated by identifying the highest and the lowest costs within the relevant range. The difference in cost divided by the difference in activity is the variable rate. Once the variable rate is found, the fixed portion is determinable.
April and March provide the highest and lowest amounts. The difference in production was 90,000 units (540,000 April - 450,000 March), and the difference in the cost of supplies was $130,500 ($853,560 - $723,060). Hence, the unit variable cost was $1.45 ($130,500 + 90,000 units). The total variable costs
for March must have been $652,500 (450,000 units * $1.45 VC per unit), and the fixed cost must therefore have been $70,560 ($723,060 - $652,500). The probable costs for July equal $681,500 (470,000 units x $1.45 VC per unit), plus $70,560 of fixed costs, a total of $752,060. Answer (A) is incorrect. The total variable costs for March equal $652,500. Answer (B) is incorrect. The variable portion of the total costs is $681,500. Answer (C) is incorrect. The amount of $749,180 is a nonsense answer.