Question

The manager of Swift Car Inspection reviewed the monthly operating costs for the past year. The costs ranged from

$ 4100 for 1100 inspections to $ 3,700 for 700 inspections.

Use the​ high-low method to calculate the variable cost per inspection. Select the formula and enter the amounts to calculate the variable cost per inspection

1.	Use the​ high-low method to calculate the variable cost per inspection.
2.	Calculate the total fixed costs.
3.	Write the equation and calculate the operating costs for 900 inspections.
4.	Draw a graph illustrating your total cost under this plan. Show the costs at 700​, 900 and 1100 inspections.

Answer 1

Answer

• High Low working

	Units	Cost
High Level	1,100	$                     4,100.00
Low Level	700	$                     3,700.00
	400	$                         400.00
Difference in Cost		$                         400.00
Difference in units		400
Variable cost per unit		$                             1.00
	High Level	Low Level
Total Cost	$                   4,100.00	$                     3,700.00
Total Units	1100	700
Variable cost per unit	$                           1.00	$                             1.00
Total Variable cost	$                   1,100.00	$                         700.00
Total Fixed Cost	$                   3,000.00	$                     3,000.00

• [1] Variable cost = $ 1.00 per inspection
• [2] Fixed Cost = $ 3000
• Equation: Total Inspection cost (Y) = $ 3000 fixed cost + ($1.00 x no. of inspections)

Operating cost for 900 inspections = 3000 + (1x900) = $ 3900

• [4]

Number of Units	Variable cost per unit	Total Variable cost	Fixed Cost total	Total COST
700	$        1.00	$             700.00	$            3,000.00	$               3,700.00
900	$        1.00	$             900.00	$            3,000.00	$               3,900.00
1100	$        1.00	$          1,100.00	$            3,000.00	$               4,100.00