Question

Use the high-low method to determine the variable and feed cost components of Montrose Oil and Lube's operating costs. Use this information to protect the monthly operating costs for a month in which the company performs 3.400 of charges Click the loon to view the data) Use the high-low method to determine the variable and fixed costs components of Montrose Oil and Lube's operating cost equation First identify the formula and calculate the variable cost component (slope) (Round your answer to the nearest cent) Variable cost per unit Next idently the formula and compute the fixed cost component (the vertical intercepting the costs for the highest level of activity (Round you wowers to the nearest whole rumber) Toll fred costs Completo Montrose Old Lube's operating coloquion (Enter the variable contenere contend the fact to the rear whole dar) Use your owwer from above to predict tot monthly operating costs Montrose Ol and Lube performs 3.400 l charges Round your answer to the nearest whole dolar) The total monthly operating costs Montrose Oil and Lube performs 3.400 oll changes is

Answer 1

28 Ans. 1 D 29 Change in operating expenses / Change in number of oil changes $4,500 / 800 $5.63 = Variable cost per unit 30 31 per unit 32 33 *Change in operating expenses = Highest cost - Lowest cost $36,400 - $31,900 = $4,500 34 35 36 *Change in number of oil changes Highest units - Lowest units 3,200 -2,600 = 800 38 Ans. 2 9 Highest cost - Total variable cost = Total fixed costs $36,400 - $18,016 $18,384 0 1 2 *Total variable cost = Variable cost per unit * Highest units $5.63 * 3,200 $18,016 3 9 5 Ans. 3 Y = Variable cost per unit (a) * X + b Y = $5.63 X + $18,384 *a = Variable cost per unit *x = Number of units *b = Total fixed costs Ans. 4 Total operating cost = (Variable cost per unit * Number of units) + Total fixed cost ($5.63" 3,400) + $18,884 $19,142 +$18,384 $37,526