Answer:
(i) 2.1
(ii) $600,000
Explanation:
Transportation costs:
Highest activity = $2,700,000
Lowest activity = $1,440,000
Change = $1,260,000
Gross tons miles:
Highest activity = $1,000,000
Lowest activity = $400,000
Change = $600,000
Variable cost per gross ton mile:
= Change in transportation costs ÷ Change in gross ton miles
= $1,260,000 ÷ $600,000
= 2.1
Total cost = Fixed cost + (variable cost × gross ton miles)
$1,440,000 = Fixed cost + (2.1 × $400,000)
Fixed cost = $1,440,000 - $840,000
= $600,000
