Question

Mountain Dental Services is a specialized dental practice whose only service is filling cavities. Mountain has recorded the following for the past nine months: Month Number of Cavities Filled Total Cost January 300 $5,000 February 650 6,050 March 325 5,200 April 475 5,750 May 550 6,050 June 575 6,200 July 600 6,250 August 350 5,100 September 700 6,600 Required: 1. Use the high-low method to estimate total fixed cost and variable cost per cavity filled. 2. Using these estimates, calculate Mountain’s total cost for filling 450 cavities.

Answer 1

Answer:

Instructions are listed below

Explanation:

Giving the following information:

Month, cavities, total cost:

January 300 $5,000

February 650 $6,050

March 325 $5,200

April 475 $5,750

May 550 $6,050

June 575 $6,200

July 600 $6,250

August 350 $5,100

September 700 $6,600

A)

Variable cost per unit= (Highest activity cost - Lowest activity cost)/ highest activity units - Lowest activity units)

Variable cost per unit= (6600 - 5000) / (700 - 300)= $4

Fixed costs= Highest activity cost - (Variable cost per unit * HAU)

Fixed costs= 6600 - (4*700)= $3,800

Fixed costs= LAC - (Variable cost per unit* LAU)

Fixed costs= 5000 - (4*300)= $3,800

B) Q= 450

Total cost= 3800 + 450*4= $5,600