Question

Bruno Company accumulates the following data concerning a mixed cost, using miles as the activity level. Miles Driven Total Cost Miles Driven Total Cost January 7,995 $14,200 March 8,500 $15,011 February 7,495 13,503 April 8,200 14,490 Compute the variable cost per mile using the high-low method. (Round variable cost per mile to 2 decimal places e.g. 1.25.) Variable cost per mile $ Compute the fixed cost elements using the high-low method. Fixed costs $

Answer 1

Answer:

The variable cost per mile is $1.50

The fixed cost element  is $2,261

Explanation:

The computation of the fixed cost and the variable cost per hour by using high low method is shown below:

Variable cost per hour = (High Total cost - low total cost) ÷ (High miles driven - low miles driven)

= ($15,011 - $13,503) ÷ (8,500 -  7,495)

= $1,508 ÷ 1,005 hours

= $1.50

Now the fixed cost equal to

= High operating cost - (High miles driven × Variable cost per hour)

= $15,011 - (8,500 × $1.50)

= $15,011 - $12,750

= $2,261