Question

Mountain Dental Services is a specialized dental practice whose only service is filling cavities. Mountain has recorded the following for the past nine months: Number of Cavities Total Month Filled Cost January 625 $5,600 February 700 6,000 March 500 4,500 April 425 4,100 May 450 4,500 June 300 3,200 July 375 3,500 August 550 4,900 September 575 5,400 Required: 1. Use the high-low method to estimate total fixed cost and variable cost per cavity filled. 2. Using these estimates, calculate Mountain's total cost for filling 500 cavities.

Answer 1

Answer is given below with working notes:

Fixed Cost Variable cost $1,100 $7.00 per cavity High and Low method February - High June- Low Difference Number of cavities 700 300 400 Total Costs $6,000 $3,200 $2,800 Variable Cost calculation Difference in cost Difference in activity $2,800 $7.00 400 June May 700 300 $7 $2 Number of cavities Variable cost rate Variable Cost Fixed Cost $4,900 $1,100 $2,100 $1,100 (Total Cost - Variable Cost) 2 Total Cost for filling 500 cavities Cavities 500 Variable Cost Fixed Cost Total Cost $3,500 (500*$7) $1,100 $4,600