Question: Using High-Low to Calculate Predicted Total Variable Cost and Total Cost for Budgeted Output Speedy Petes is a small start-up company that delivers high-end coffee

Using High-Low to Calculate Predicted Total Variable Cost and Total Cost for Budgeted Output

Speedy Petes is a small start-up company that delivers high-end coffee drinks to large metropolitan office buildings via a cutting-edge motorized coffee cart to compete with other premium coffee shops. Data for the past 8 months were collected as follows:

Month Delivery Cost Number of Deliveries
May $63,450 1,800
June 67,120 2,010
July 66,990 2,175
August 68,020 2,200
September 73,400 2,550
October 72,850 2,630
November 75,450 2,800
December 73,300 2,725

Assume that this information was used to construct the following formula for monthly delivery cost.

Total Delivery Cost = $41,850 + ($12.00 Number of Deliveries)

Required:

Assume that 3,000 deliveries are budgeted for the following month of January. Use the total delivery cost formula for the following calculations:

1. Calculate total variable delivery cost for January. $

2. Calculate total delivery cost for January. $

Feedback

1. Total Variable Delivery Cost = Variable Rate Number of Deliveries

2. Total Delivery Cost = Fixed Cost + (Variable Rate Number of Deliveries)

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