E21-30 Determing Mixed Costs�The High-Low Method

Preview 3 of 8 pages

See the first 3 pages exactly as they appear in the document.

Page 1
Read page 1 as text
E21 - 30 Determing Mixed Costs — The High - Low Method The manager of Able Car Inspection reviewed the monthly operating costs for the past year. The costs ranged from $4,000 for 1,000 inspections to $3,600 for 600 inspections. Requirements 1. Calculate the variable cost per inspection. High 1,000 inspections $4,000 Low 600 inspections $3,600 Difference 400 inspections $400 Variable cost $1 per inspection ($400 / 400) 2. Calculate the total fixed costs . Fixed cost = Total cost – Variable cost Take high level = $4,000 – (1,000 x $1) = $4,000 - $1,000 = $3,000 Fixed cost = $3,000 3. Write the equation and calculate the operating costs for 800 inspections. Equation of Total cost = Fixed cost + Variable cost = $3,000 + $n Cost of 800 inspections = $3,000 + ($1 x 800) = $3,800
Page 2
Page 3
Read page 3 as text
4. Draw a graph illustrating the total cost under this plan. Label the axes, and show the costs at 600, 800, and 1,000 inspections.

5 more pages in the full document

Unlock it once and it stays in your library, ready to chat with or turn into flashcards.