Estimating fixed and variable costs using the high-low method Payne Ice Cream Company produces various ice cream products for which demand is highly seasonal.

The company sells more ice cream in warmer months and less in colder ones. Last year, the high point in production activity occurred in August when Payne produced 45,000 gallons of ice cream at a total cost of $36,000. The low point in production activity occurred in February when the company produced 21,000 gallons of ice cream at a total cost of $300.

Required Use the high-low method to estimate the amount of fixed cost per month incurred by Payne Ice Cream Company.

PROBLEMS—SERIES B