Question

High-Low Method

Impeccable Puppy Training, Inc. provides classes that are popular with dog owners. The number of classes offered over five months, along with the total costs of offering these classes, follows:

                                       Classes Offered            Costs Incurred

   April                                       10                            $9,500

   May                                       8                          $9,000

June                                       20                          $18,000

July                                          13                           $12,000

August                                     18                           $17,500

         

1. Using the high-low method, determine AND state the cost formula (3 points):

2. Using the cost formula, determine the total cost of offering 25 puppy training classes in September (3 points):

Answer 1

The answer has been presented in the supporting sheet. For detailed answer refer to the supporting sheet.

А в Answer Part 1) Variable cost per class = (High level cost-low level cost)/(high level classes - low level classes) = (18000-9000)/(20-8) = 9000/12 = $ 750 Fixed cost per month = Total cost for 20 classes - variable cost for 20 classes = 18000-( 20*750) = $ 3000 Thus the Formula Total cost = 3000 + (750* No. of classes offered) A = 3000+750B Note in the above equation A = Fixed Cost B = No. of classes offered Part 2) Cost for 25 training classes Total cost = 3000 + (750* No. of classes offered) = 3000 + ( 750*25) = $21750 Thus the correct answer total cost = $ 21750