CHAPTER $3$ High Low Method Forecasting a Mixed Cost

Worksheet #$1$

In Class Practice

Speedy Pete's Coffee Delivery

Page $4$

HIGH$-$LOW METHOD

$\backslash$table$[[$Delivery$,$Cost,# of Deliveries,$],[$May$,$$$,63,450,1800],[$June$,$$$,67,120,2010],[$July$,$$$,66,990,2175],[$August$,$$$,68,020,2200],[$September$,$$$,73,400,2550],[$October$,$$$,72,850,2630],[$November$,$$$,75,450,2800],[$December$,$$$73,300,2725,]]$

FYI: Total Cost$=$Total Fixed Cost $+($Variable Rate $*$ Activity$)$

Step $1.$ Find the High Low Activity for the data set$]$

Step $3.$ Estimate the fixed cost component:

Fixed Cost $=$ Total Cost at High Point $-($Variable Rate X Activity at High Point$)$

Step $3$: Form the cost formula for delivery cost

Total Cost $=$ Fixed Cost from Step $3+($Variable Rate from step $2*$ Number of Deliveries$)$

Step $5.$ Estimate the total delivery cost for January based on $3000$ deliveries

Use your Formula created in step $4$ to solve. Show your work.