Question

Rooney Computer Services, Inc. has been in business for six months. The following are basic operating data for that period: Month July Aug. Sept. Oct. Nov. Dec. Service hours 112 136 262 420 316 324 Revenue $ 6,608 $ 8,024 $ 15,458 $ 24,780 $ 18,644 $ 19,116 Operating costs $ 4,210 $ 5,240 $ 7,190 $ 11,130 $ 9,130 $ 10,590 Required What is the average service revenue per hour in each month and the overall average for the six-month period? Use the high-low method to estimate the total monthly fixed cost and the variable cost per hour. Determine the average contribution margin per hour.

Answer 1

Answer:

The total monthly fixed cost and the variable cost per hour is $1692.60 and $22.47

the average contribution margin per hour is $36.53

Explanation:

The computation of the variable cost and fixed cost is shown below:

The computation of the variable cost per unit is shown below:

= (High operating cost -  low operating cost) ÷ (High service hours - low service hours)

= ($11,130 - $4,210) ÷ (420 - 112)

= $6,920 ÷ 308

= $22.47

And, the fixed cost equals to

= High operating cost - (High service hours × variable cost per hour)

= $11,130 - (420 × $22.47)

= $11,130 - $9437.40

=  $1692.60

And the average contribution margin per hour equals to

=  Revenue per hour - variable cost per hour

= $59 - $22.47

= $36.53

The revenue per hour = Revenue ÷ service hours = $6,608 ÷ 112 = $59