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:

Month	Number of Cavities Filled	Total Cost
January	300	$5,200
February	500	5,650
March	550	6,000
April	700	6,400
May	475	5,850
June	425	5,400
July	350	5,200
August	575	6,200
September	400	5,350

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 450 cavities.

Presidio, Inc., produces one model of mountain bike. Partial information for the company follows:

Required:
1. Complete Presidio’s cost data table.
2. Calculate Presidio’s contribution margin ratio and its total contribution margin at each sales level indicated in the cost data table assuming the company sells each bike for $650.
3. Calculate net operating income (loss) at each of the sales levels assuming a sales price of $650.

Answer 1

1)Variable cost per cavity = Change in cost/Change in Cavity = (6400-5200)/(700-300) = 3 per cavity

Fixed cost = 6400-(700*3) = 4300

2) Total Cost = Fixed cost+Variable cost = 4300+(450*3) = 5650

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