Question: Diamond Railroad decided to use the high-low method and operating data from the past six months to estimate the fixed and variable components of transportation

Diamond Railroad decided to use the high-low method and operating data from the past six months to estimate the fixed and variable components of transportation costs. The activity base used by Diamond Railroad is a measure of railroad operating activity, termed €œgross-ton miles,€ which is the total number of tons multiplied by the miles moved.

Transportation Costs Gross-Ton Miles January $1,190,000 1,043,000 385,000 February March April May June 434,000 900,000

Determine the variable cost per gross-ton mile and the fixed cost.

Transportation Costs Gross-Ton Miles January $1,190,000 1,043,000 385,000 February March April May June 434,000 900,000 1,015,000 350,000 420,000 920,000 1,250,000 360,000 525,000

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