Question

choices for no.4 and no.6 are:

-fixed cost

-number of airplane flight hours

-variable rate

High-Low Method, Cost Formulas During the past year, the high and low use of three different resources for Fly High Airlines occurred in July and April. The resources are airplane depreciation, fuel, and airplane maintenance. The number of airplane night hours is the driver. The total costs of the three resources and the related number of airplane flight hours are as follows: Airplane Flight Resource Hours Total Cost Airplane depreciation: High 44,000 $ 18,200,000 Low 28,000 $ 18,200,000 Fuel: High 44,000 445,896,000 Low 28,000 283,752,000 Airplane maintenance: High 44,000 16,408,000 Low 28,000 12,152,000 Required: Use the high-low method to answer the following questions. If an answer is zero, enter "o". If required, round your answers to nearest dollar 1. What is the variable rate for airplane depreciation? per flight hour What is the fixed cost for airplane depreciation?

Answer 1

1 Variable rate for airplane depreciation $0 per flight hour Fixed cost for airplane depreciation $18,200,000 2 Total cost of airplane depreciation $18,200,000 Entire cost is fixed cost Working notes: High and Low method Total cost Airplane flight hours High $18,200,000 44,000 Low $18,200,000 28,000 Difference SO 16,000 Entire cost is fixed cost since the cost has not changed between activity level 3 Variable rate for fuel $10,134 per flight hour Fixed cost for fuel $0 4 Total cost of fuel $10,134 per flight hour Working notes: High and Low method Total cost Airplane flight hours Per flight hour High $445,896,000 44,000 $10,134.00 Low Difference $283,752,000 $162,144,000 28,000 16,000 $10,134.00 Since cost per flight hour is same, the entire cost is variable cost 5 Variable rate for airplane maintenance $266 per flight hour Fixed cost for airplane maintenance $4,704,000 6 Total cost for airplane maintenance $4,704,000 ($266) Xper flight hour Working notes: High and Low method Total cost Airplane flight hours Per flight hour High $16,408,000 44,0001 $372.91 Low $12,152,000 28,000 $434.00 Difference $4,256,000 16,000 Maintenance cost per flight hour Difference in airplane maintenance Difference in Airplane flight hours $4,256,000 16,000 $266 Calculation of Fixed cost Variable cost Fixed cost December $11,704,000 $4,704,000 April $7,448,000 (Total flight hours * Variable cost) $4,704,000 (Total costs-Total variable costs) 7 Total cost of airplane maintenance $18,200,000 Total cost of fuel $364,824,000 36,000*$10,234 Total cost of airplane maintenance $14,280,000 $4,704,000+36,000*$266