Question

Supply costs at Coulthard Corporation's chain of gyms are listed below: Client-Visits Supply Cost March 11,665 $ 28,352 April 11,461 $ 28,296 May 11,993 $ 28,440 June 13,800 $ 28,928 July 11,725 $ 28,368 August 11,211 $ 28,229 September 12,005 $ 28,443 October 11,696 $ 28,360 November 11,844 $ 28,400 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. Compute the variable component first, rounding off to the nearest whole cent. Then compute the fixed component, rounding off to the nearest whole dollar. Those estimates are closest to:

Answer 1

Answer:

The variable cost per unit and the fixed cost is $0.27 per unit and $25,202 respectively

Explanation:

The computation of the variable and fixed components are shown below:

For variable cost per unit, it equals to

= (High supply cost - low supply cost) ÷ (High client visit- low client visit)

= ($28,928 - $28,229) ÷ (13,800 - 11,211)

= $699 ÷ 2,589

= $0.27 per unit

Now the fixed component equal to

= (High supply cost) - (variable cost per unit × high client visit)

= $28,928 - ($0.27 per unit × 13,800)

= $28,928 - $3,726

= $25,202