Question

Johnson Trucking Company wants to determine a fuel surcharge to add to its customers' bills based on the number of miles driven to each area. It wants to separate the fixed and variable portion of the truck's operating costs so it has a better idea of how distance affects these costs. Johnson Trucking Company has the following data available. Month January February March April May June Miles driven 16,200 17,000 19,000 16,500 17,400 15,000 Total operating costs $22,650 $23,250 $24,000 $22,875 $23,550 $22,000 Using the high-low method, the fixed costs in a month are (Round any intermediary calculations to the nearest cent.) O A. $46,000 O B. $14,500 OC. $9,500 OD. $2,000

Answer 1

Correct answer-----------(B) $14,500

Working

		Cost	No. of activities
A	High Level	$          24,000.00	19000
B	Low Level	$          22,000.00	15000
C=A-B	Difference	$             2,000.00	4,000
A	Cost difference	$             2,000.00
B	No. of activities difference	4000
C=A/B	Variable cost per unit	$                     0.50
		High Level	Low Level
A	No. of activities	19000	15000
B	Variable cost per unit	$                0.5000	$                  0.5000
C=AxB	Total Variable cost	$             9,500.00	$              7,500.00
D	Total cost	$          24,000.00	$            22,000.00
E=D-C	Total fixed cost	$          14,500.00	$            14,500.00