Answer:
a. (i) $1.40
(ii) $190,000
b. $3,410,000
Explanation:
The computation of fixed cost of maintenance annually and the variable cost of maintenance per visitor is shown below:-
a. (i) Variable cost per visitor = (Maintenance cost at highest number of visitors - Maintenance cost at lowest number of visitors) ÷ (Highest number of visitor - Lowest number of visitor)
= ($3,830,000 - $2,773,000) ÷ ($2,600,000 - $1,845,000)
= $1,057,000 ÷ $755,000
= $1.40
(ii) Fixed cost of maintenance = Total costs - Variable cost at that level
= $2,773,000 - $1,845,000 × $1.40
= $2,773,000 - $2,583,000
= $190,000
b. The computation of estimated maintenance costs is shown below:-
Estimated maintenance costs = Fixed costs + Variable cost per visitors × Number of visitors
= $190,000 + 2,300,000 × $1.40
= $190,000 + $3,220,000
= $3,410,000
