Question

Jones lce Cream Stand is operated by Mr. Jones and experiences different sales patterns throughout the year. To plan for the future, Mr. Jones wants to determine its cost behavior patterns. He has the following information available about the ice cream stand's operating costs and the number of soft serve cones served. Total operating costs $1,900 $1,975 $2,000 $2,700 $2,175 Month Number of ice cream cones 2,000 April Мay 2,100 2,125 4,000 2,500 2,900 June July August September $2,500 Using the high-low method, the monthly operating costs if Mr. Jones sells 1,450 ice cream cones in a month are (Round any intermediary calculations to the nearest cent.) OA. $1,680 O B. $1,600 O C. $1,100 D. $580 O

Answer 1

Variable component=(high cost-low cost)/(units of high lost-units of low cost)

=(2700-1900)/(4000-2000)=0.40

Fixed costs= 1900-(2000*0.4)=1100

The equation is =1100+(0.4* no of icecream sold)

=1100+(0.4*1450)

=$1,680

Option A