Answer:
Requirement 1
<em>High Point = March</em>
<em>Low Point = January</em>
Requirement 2
<em>Variable rate for tanning $0.41 per tanning appointment
</em>
<em>Fixed cost per month $1,457</em>
Requirement 3
<em>Total Cost = $1,457 + $0.41 × Activity Level</em>
Requirement 4
<em>Total predicted cost for September $ 2,482</em>
<em>Total fixed cost for September $1,457</em>
<em>Total predicted variable cost for September $1,025</em>
Explanation:
Requirement 1
High Point = March
Low Point = January
Requirement 2
<em>Variable Cost = Difference in Overhead Cost (High - Low)/ Difference in Activity (High - Low)</em>
= $2,810 - $1,744 / 3,300 - 700
= $1,066/ 2,600
= $0.41
<em>Fixed Cost Component = Total Overhead Cost - Variable Cost × Selected Activity.</em>
Lets Select, January 700 $1,744
Fixed Cost Component = Total Overhead Cost - Variable Cost × Selected Activity.
= $1,744 - $0.41 × 700
= $1,457
Requirement 3
Cost formula for tanning services
<em>Total Cost = Fixed Cost + Variable Cost</em>
thus,
Total Cost = $1,457 + $0.41 × Activity Level
Requirement 4
Total Cost = $1,457 + $0.41 × Activity Level
= $1,457 + $0.41 × 2,500
= $ 2,482
