Sophia operates a full-service day spa in a small college town. She rented space next to her spa and opened a spray tanning salon. She initially expected tanning costs to be mostly fixed, but observed that total costs increased with the number of appointments. The past 8 months of data are:

Month	Tanning Appointments	Total Cost
January	600	$1,750
February	2,000	$2,110
March	3,600	$2,830
April	2,500	$2,500
May	1,400	$1,700
June	2,400	$2,255
July	2,160	$2,100
August	3,000	$2,610

Rounding instructions: Round the variable rate (per appointment) to the nearest cent and use that rounded rate in subsequent requirements. Round the fixed cost per month to the nearest dollar and use that in subsequent requirements. Where requested, round final answers to the nearest dollar.

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Required

1) Which month represents the high point (by activity)? Which month represents the low point?

• High point: __________________

• Low point: __________________

2) Using the high–low method, compute:

• Variable rate per tanning appointment: $ __________ per appointment

• Fixed cost per month: $ __________ per month

3) Using the variable rate and fixed cost from (2), write the cost formula for tanning services:

Total Cost=Fixed Cost per Month+(Variable Rate×Appointments)

4) Using your formula from (3), predict the total cost for September for 2,400 appointments. Of that total, state the total fixed cost and the total variable cost for September. (Round final dollar amounts to the nearest dollar.)

• Total predicted cost for September: $ __________

• Total fixed cost for September: $ __________

• Total predicted variable cost for September: $ __________

5) Using the same formula, predict the total cost for September for 3,700 appointments. (Round to nearest dollar.)

• Total predicted cost for September: $ __________

While the total cost prediction is [greater/less] than the prediction from Requirement 4, Sophia should be concerned that 3,700 appointments is [higher/lower] than the highest number of tanning appointments (3,600) contained in the eight months of data used to construct the high–low cost function.

• Fill the two brackets: [greater/less], [higher/lower].

6) Which of the following statements is correct when using the high–low method to estimate costs? (Select one; options provided by instructor.)