Question

Oak Island Amusements Center provides the following data on the costs of maintenance and the number of visitors for the last three years. Number of Visitors per Year (thousands) 1, 885 2, 065 3,595 Maintenance Costs (S000) $4,493 4,934 8, 426 51 Required: a. Use the high-low method to estimate the fixed cost of maintenance annually and the variable cost of maintenance per visitor. b. The company expects a record 2,000,000 visitors next year. What would be the estimated maintenance costs? Complete this question by entering your answers In the tabs below. Required A Required B Use the high-low method to estimate the fixed cost of maintenance annually and the variable cost of maintenance per visitor. (Enter your answers in dollars not in thousands of dollars. Round "Variable cost" answer to 2 decimal places.) Variable cost per visitor Annual fixed cost Required B 17 of 31 < Prev Next > 5:42

Answer 1

Change in maintenance costs= Highest maintenance costs-Lowest maintenance costs

= $8426000-4493000= $3933000

Change in number of visitors= Highest number of visitors-Lowest number of visitors

= 3595000-1885000= 1710000

Variable cost per visitor= Change in maintenance costs/Change in number of visitors

= $3933000/1710000= $2.30 per visitor

Fixed costs= Total maintenance costs-Variable costs

= $8426000-(3595000*$2.30)

= $8426000-8268500= $157500

Variable cost per visitor	$2.30
Annual fixed cost	$157500

b) Estimated maintenance costs= Variable costs+Fixed costs

= (2000000*$2.30)+$157500

= $4757500

Estimated maintenance costs

$4757500