Question

(most pics are the choices)

High-Low Method Luisa Crimini has been operating a beauty shop in a college town for the past 10 years. Recently, Luisa rented space next to her shop and opened a tanning salon. She anticipated that the costs for the tanning service would primarily be fixed, but found that tanning salon costs increased with the number of appointments. Costs for this service over the past 8 months are as follows: Tanning Month Appointments Total Cost January 600 $1,754 February 1,900 $2,170 March 3,200 $2,820 April 2,600 $2,500 May 1,400 $1,700 June 2,200 $2,265 July 2,140 $2,200 August 3,000 $2,630 Required: 1. Which month represents the high point? The low point? High point Low point In your calculations, round per unit costs to the nearest cent. 2. Using the high-low method, compute the variable rate for tanning. Compute the fixed cost per month. Round the variable rate per tanning appointment to the nearest cent and use it in your further calculations. Round the fixed cost per month to the nearest dollar and use it in your further calculations.

Answer 1

Question 1

High Point - March

Low Point - January

Question 2

Variable Rate for Training as per High Low Method = Training Costs at High Point - Training Costs at Low Point / Highest Activity Level - Lowest Activity Level

Training Costs at High Point = $ 2,820

Training Costs at Low Point = $ 1,754

Highest Activity Level = 3,200 Appointment

Lowest Activity Level = 600 Appointment

Variable Cost Rate for Training Appointment as per High Low Method = 2,820 - 1,754 / 3,200 - 600

Variable Cost Ratio for Training Appointment as per High Low Method = 1,066 / 2,600 = $ 0.41

Fixed Costs = 2,820 - 0.41 * 3,200 Appointment

Fixed Costs = 2,820 - 1,312

Fixed Costs = $ 1,508

Question 3

Formula for Training Services = Fixed Costs + Variable Costs * Number of Training Appointment

Formula for Training Services = 1,508 +(0.41 * Number of Training Appointment)

Option C is the Correct Answer

Question 4

Total Fixed Cost for September = $ 1,508

Total Variable Cost for September = Variable Cost Rate * Number of Appointment

Total Variable Cost for September = 0.41 * 2,400. $ 984

Total Predicted Cost for September = 1,508 + (0.41 * Number of Appointment)

Total Predicted Cost for September = 1,508 + (0.41 * 2,400)

Total Predicted Cost for September = 1,508 + 984 = $ 2,492

Question 5

Option A is the Correct Answer.