High-Low Method for a Service Company

Boston 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 Boston Railroad is a measure of railroad operating activity, termed “gross-ton miles,” which is the total number of tons multiplied by the miles moved.

	Transportation Costs		Gross-Ton Miles
January	$639,600		301,000
February	713,100		336,000
March	504,000		218,000
April	683,700		326,000
May	573,500		262,000
June	735,200		354,000

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

Variable cost (Round to two decimal places.)	$ per gross-ton mile
Total fixed cost	$

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Relevant Range and Fixed and Variable Costs

Vogel Inc. manufactures memory chips for electronic toys within a relevant range of 88,400 to 142,800 memory chips per year. Within this range, the following partially completed manufacturing cost schedule has been prepared:

Components produced	88,400	109,200	142,800
Total costs:
Total variable costs . . . . . . . . .	$33,592	(d)	(j)
Total fixed costs . . . . . . . . . . . .	37,128	(e)	(k)
Total costs . . . . . . . . . . . . . . . . .	$70,720	(f)	(l)
Cost per unit:
Variable cost per unit . . . . . . .	(a)	(g)	(m)
Fixed cost per unit . . . . . . . . . .	(b)	(h)	(n)
Total cost per unit . . . . . . . . . .	(c)	(i)	(o)

Complete the cost schedule below. When computing the cost per unit, round to two decimal places. Round all other values to the nearest dollar.

Cost Report
Components produced		88,400		109,200		142,800
Total costs:
Total variable costs		$33,592	(d)	$	(j)	$
Total fixed costs		37,128	(e)		(k)
Total costs		$70,720	(f)	$	(l)	$
Cost per Unit
Variable cost per unit	(a)	$	(g)	$	(m)	$
Fixed cost per unit	(b)		(h)		(n)
Total cost per unit	(c)	$	(i)	$	(o)	$

Answer rating: 100% (QA)

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