ETutor is an online tutoring service provider that is partic

ETutor is an online tutoring service provider that is particularly popular with college students. The company is interested in estimating the fixed and variable components of its tutoring services costs. The manager believes that these costs are driven by the number of hours of tutoring services provided. The following information was gathered for the last six months of business Month January February March April May une Number of Hours Tutoring costs 25,000 41,000 29,000 31,000 34,000 18,000 $308,00e0 420,000 352,000 373,000 378,000 252,000 Required 1) Compute the average tutoring cost per hour for the six-month period. (Round the average tutoring cost per hour to two decimal points.) 2) Use the high-low method to estimate the total fixed cost and the variable cost per hour. (Round the variable cost per hour to two decimal points.) 3) Name one advantage and one disadvantage of the high-low method 4) Describe the scattergraph method that can be used to analyze mixed costs

Solution

1) Average tuiting cost per hour :

2) High $420000 41000 hours

Low $252000 18000 hours

difference $168000 23000 hours

Variable costs = $168000/23000 = $7.30 per hour

Fixed cost = $252000 - (18000 * 7.30) = $120600

3) The advantage of high-low method is that it is easy to calculate and a good estimation of variable and fixed costs.

The disadvantage of high-low method is that the method do not take care of in-between levels of High and Low levels.

4) the scattergraph method could be forwarded to you as on graph, so sorry.

Month	tuitoring Costs	No. of hours	Average tuitoring cost per hour
Jan	308000	25000	12.32
Feb	420000	41000	10.24
Mar	352000	29000	12.14
Apr	373000	31000	12.03
May	378000	34000	11.12
June	252000	18000	14
TOTAL	2083000	178000	12.70