Question

Supply costs at Lattea Corporation's chain of gyms are listed below: Client-Visits Supply Cost March 11,665 $28,579 April 11,461 $28,413 May 11,993 $28,837 June 13,800 $28,928 July 11,725 $28,640 August 11,211 $28,239 September 12,005 $28,838 October 11,696 $28,596 November 11,844 $28,721 Management believes that supply cost is a mixed cost that depends on client-visits. Use the high-low method to estimate the variable and fixed components of this cost,

Answer 1

Answer:

Explanation:

March 11,665 $28,579

April 11,461 $28,413

May 11,993 $28,837

June 13,800 $28,928

July 11,725 $28,640

August 11,211 $28,239

September 12,005 $28,838 October 11,696 $28,596

November 11,844 $28,721

Variable Cost = Highest Activity Cost - Lowest Activity Cost/

Highest Activity Units - Lowest Activity Units

28,928 - 28, 239 = 689

13,800. - 11, 211 = 2,589

= 689/2,589

= 0.266

Fixed Cost   =   Highest Activity Cost - (Variable Cost Per Units x Highest Activity Units)

28,928 - (0.266 x 13,800)

= 28,928 - 3,670.80

= 25,257.20

Answer 2

Answer:

$0.48 per client-visit; $22,856 per month

Explanation:

Where,

y2 is the total cost at highest level of activity;                                                                       y1 is the total cost at lowest level of activity;                                                                      x2 are the number of units/labor hours etc. at highest level of activity; and                           x1 are the number of units/labor hours etc. at lowest level of activity

Variable Cost per Unit

= (28,904 -28,227) / (12,600-11,199)

= $0.48

Total Fixed Cost

= y2 ? bx2

= 28,904 - $0.48 * 12600

= $22,856.00