Question

E5-7 (Algo) Estimating Cost Behavior Using High-Low Method [LO 5-3]

Mountain Dental Services is a specialized dental practice whose only service is filling cavities. Mountain has recorded the following for the past nine months:

Month	Number of Cavities Filled	Total Cost
January	375	$5,300
February	500	5,850
March	350	5,200
April	600	6,250
May	325	5,150
June	475	5,700
July	525	6,100
August	575	6,300
September	450	5,550

Required:

1. Use the high-low method to estimate total fixed cost and variable cost per cavity filled.

2. Using these estimates, calculate Mountain’s total cost for filling 400 cavities.

Complete this question by entering your answers in the tabs below.

• Required 1
• Required 2

Use the high-low method to estimate total fixed cost and variable cost per cavity filled. (Round your Variable cost per unit to 2 decimal places.)

	Fixed Cost Variable Cost per cavity filled

Using these estimates, calculate Mountain’s total cost for filling 400 cavities.

	Estimated Total Cost

Answer 1

Variable cost = (Cost at highest activity - Cost at lowest activity) /(Highest activity-Lowest activity)

= (6250-5150)/(600-325) = 4

Total Cost = Variable + Fixed

6250 = (4*600) + Fixed

Fixed cost = 3850

Fixed cost	3850
Variable cost	4

Estimated total cost

= (400*4) + 3850

= 5450