Question

use the High-low method to determine the cost equation that expresses how monthly operating costs behave in relation to the number of trips made. First, highlight the two months you will using (the highlight icon looks like a spilling paint bucket). Click on the “insert” tab on the menu bar then select “Text Box” to draw a box in which to show and clearly label your high-low cost equation. Follow and show the 3-step process in your textbook. Remember, these are dollars amounts, so be sure to format them as dollars and cents. Define the x and y variables in the equation (where x = ?; y = ? in words).

Number of Operating Trips Costs anuary February March 705 $ 29,965 High-Low Cost Equation 710 $ 27,910 950 $ Level #of Trips Operating Cost 33,503 April May 670 $ High 26,312 1074 30974 504 $ 25,160 504 Low 25160 880 $ 29,605 Difference 5814 une 570 uly August September October 695 $ Variable cost per trip 5814/570= 21,496 10.2 610 $ 27,320 744 S Total Cost at High Level 28,247 30974 1,020 $ Less Variable cost at a High Level 10.20*1074 10954,8 37,511 November Fixed Cost 1,074 $ 30,974 20019.2 December 1,050 $ 34,987

Answer 1

Total Factory Overhead cost
	No. of trips	Operating cost
High level of activity	1,074	$30,974
Low level of activity	504	$25,160
Change	570	$5,814
Variable maintainance cost per trip =$5,814 / 570 trips =$10.20 per trip
Fixed cost element =$30,974 - (1,074*$10.20)
Fixed cost element =$30,974 - $10,954.80
The cost volume formula is:
Y =$20,019.20 + $10.20X
Here Y means the Total product cost(Fixed costs+Variable costs) and X means the no. of trips made or the independent variable