Question

Palisades Eco-Park is a small ecological reserve that admits a relatively small number of visitors on any day, but provides both educational and entertaining lectures, exhibitions, and opportunities to observe nature. The company has collected the following data on labor costs and number of visitors to the park over the last 30 months.

Month Labor Cost Visitors $26, 520 2,480 $37,274 3,659 $41,052 3,968 $32,506 3,137 $35,753 3,350 $33,558 3,888 $32,891 3,113 $39.374 3,778 $39,614 3,897 $48,205 5,042 $43,300 4,201 $40.888 3,959 $35,378 3,410 $34,073 3,298 $37,974 3,541 $27,218 2,963 $31,495 4,795 $30, 773 3,933 $28,338 3,405 $30,816 4,196 $26,389 2,823 $25,324 2,533 $29.675 4.612 $32,970 5,389 $28,882 3,659 $32,549 4,622 $29,428 4,220 $30,738 4,306 $29, 209 3,545 $28,630 2,93e

Required:

a. Estimate the labor costs assuming 3,200 visitors for the month using the high-low method. (Do not round intermediate calculations. Round your final answer to nearest whole dollar amount.)

Answer 1

Fixed cost remains same at all activity levels and variable cost changes as per activity leve. The above question is expained below.

High-low method is a way to separate fixed cost and Variable cost this method invokes comparing the highest lowest level of activities and their costs. Fixed cost = Total cost - Variable cost variable cost = cost at highest activity - Cost ad ctivity Highest activity units - lowest activity units In the given question, labour cost and number of visitors are given. So, Number of visitors is an activity and cost is labour costo Highest activity => 10th month = 5042 visitors Cost at highest activity = $48205

lowest activity = 1st month 2400 visitory Cost at lowest activity = $26520 from the above explained formula o l a Variable cost $48205 - $ 26520 5042 - 2400 is = $8.2078 por visitor At highest activity - og fixed cost = $48205 - ($8.2078 x 5042 visitors peritor uus = $6821-4784 At lowest fixed activity = cost = $26520- ($8.2078 per visitor x 240 visitors) = $68 21.94044

and 4ixed cost variable remains same at all activity cost changes as per activity levels level for 3900 visitors, labour cost = fixed cost = $6821.2724 Variable Cost = Number of visitors O Cost per w sitor = 3900 visitors X $8.2078 per mister E = $ 26264.96 Total labour Cost = = $26264.96 + $6821.2724 $ 33086 (Rounded off to nearest dollar)