Question

Supply costs at Coulthard Corporation's chain of gyms are listed below March April May June July August September October November Client-Visits Supply Cost 11,656 $28,412 11,452 $28,331 11,984 $ 28,544 12,900 $ 28,910 11,716 $ 28,436 11,202 $28,231 11,996 $28,548 11,687 $ 28,425 11,835 $28,484 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: (Round your intermediate calculations to 2 decimal places.)

Answer 1

Answer:

Fixed costs= $23,750

Variable cost per unit= $0.40

Explanation:

Giving the following information:

Client-Visits Supply Cost

11,656 $28,412

11,452 $28,331

11,984 $ 28,544

12,900 $ 28,910

11,716 $ 28,436

11,202 $28,231

11,996 $28,548

11,687 $ 28,425

11,835 $28,484

To calculate the unitary variable cost and the fixed costs, we need to use the following formulas:

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

Variable cost per unit= (28,910 - 28,231) / (12,900 - 11,202)

Variable cost per unit= $0.40

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

Fixed costs= 28,910 - (0.4*12,900)

Fixed costs= $23,750

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

Fixed costs= 28,231 - (0.4*11,202)

Fixed costs= $23,750