Question

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 would be closest to: (Round your Variable cost per unit to 2 decimal places.)

$2.00 per client-visit; $28,637 per month

$.89 per client-visit; $17,708 per month

$0.35 per client-visit; $24,261 per month

$0.31 per client-visit; $24,766 per month

Answer 1

Answer:

$0.31 per client-visit ; $24,766 per month

Explanation:

month     clients     supply cost

March 11,661 $28,575

April 11,457 $28,409

May         11,989 $28,833

June 13,400 $28,920

July           11,721 $28,636

August  11,207 $28,235

Sept.        12,001 $28,834

October  11,692 $28,592

Nov.  11,840 $28,717

variable cost per unit = change in cost / change in activity = ($28,920 - $28,235) / (13,400 - 11,207) = $685 / 2,193 = $0.31 per client visit

fixed cost = total cost - variable cost = $28,920 - (13,400 x $0.31) = $28,920 - $4,154 = $24,766