High-Low Method, Cost Formulas During the past year, the high and low use of three different...

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High-Low Method, Cost Formulas During the past year, the high and low use of three different resources for Fly High Airlines

2. What is the cost formula for airplane depreciation? Total cost of airplane depreciations 3. What is the variable rate for

ostane 3. What is the variable rate for fuel? per flight hour What is the fixed cost for fuel? 4. What is the cost formula fo

business accounting

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Answer 1

Answer #1

Solution:

1. Variable rate for airplane depreciation = $0 per flight hour

Because we know that Depreciation Expense are fixed costs, therefore charged periodically.

2. Total cost of airplane depreciation = $18,400,000

3. Variable rate for airplane fuel = Total cost / Flight hours

= $445,896,000 / 44,000

= $ 10,134 Per flight hour

Fixed cost for fuel = $0 (since, fuel cost are variable cost and thus changes according to flight hours)

4. Cost formula for fuel = $10,134×Flight Hours

5. Variable rate for airplane maintenance = Difference between total cost at high & low point / difference between flight hours at high & low point

= ($16,208,000-12,088,000) / (44,000-28,000)

= $257.50

Fixed cost for airplane maintenance = $16,208,000 + 44,000×$257.50 = $4,878,000

6. Cost formula for airplane maintenance = $4,878,000 + $257.50× Flight Hours

7. Total cost of airplane dep. = $18,400,000 (No. change with change in flight hours as it is fixed cost)

Total cost of fuel = 36,000×$10,134 = $364,824,000

Total cost of airplane maintenance = $4,878,000 + $257.50×36,000 = $14,148,000

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Answer 2

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