Question

Suzy’s Cool Treatz is a snow cone stand near the local park. To plan for the future, the owner wants to determine her cost behavior patterns. She has the following information available about her operating costs and the number of snow cones served. Month Number of snow cones Total operating costs January 3,500 $5,000 February 3,800 $4,800 March 5,000 $6,800 April 3,600 $5,450 May 4,700 $6,200 June 4,250 $5,950 Suzy uses the high-low method to determine her operating cost equation. What are her estimated costs at 4,582 snow cones? When calculating the variable cost per unit, round your answer to two decimal places before completing your calculations. Do not use dollar signs, commas or decimals in your answer. Input your answer to the nearest whole number.

Answer 1

Answer:

Cost= $6,242.18

Explanation:

Giving the following information:

Month Number of snow cones Total operating costs

January 3,500 cones  $5,000

February 3,800 cones $4,800

March 5,000 cones $6,800

April 3,600 cones $5,450

May 4,700 cones $6,200

June 4,250 cones $5,950

Suzy uses the high-low method to determine her operating cost equation.

Variable cost per unit= (Highest activity cost - Lowest activity cost)/ highest activity units - Lowest activity units)

Variable cost per unit= (6,800 - 4,800) / (5000 - 3,500)= 1.3333

Fixed costs= Highest activity cost - (Variable cost per unit * HAU)

Fixed costs= 6,800 - (1.3333*5000)= 133

Fixed costs= LAC - (Variable cost per unit* LAU)

Fixed costs= 4800 - (1.3333*3,500)= 133

Q= 4,582

Cost= 133 + 4582*1.3333= $6,242.18