Log Ou EXAM 2 Quiz 00 Time Left 10640 Casey Follmer Attempt

Log Ou EXAM 2 - Quiz :00 Time Left: 1:06:40 Casey Follmer: Attempt 1 Question 23 (4 points) 9 10 QThe phone bll for t Company consists of both fixed and varlable costs. Refer to the 4-month data below and apply the high-low method to answer the question. Minutes Total Bill 320 $2,880 200 $2,400 400 $3,000 30 $2,800 3 14 15 anuary February March April What is the fixed portion of the total cost? 18 19 20 Aprl 300 $2,000 iz Status ed O a) $3,000 0

Solution

Highest level of activity = 400 minutes
Highest bill = $3,000
Lowest level of activity = 200 minutes
Lowest bill = $2,400

Variable Cost per minute = (Highest bill - Lowest bill) / (Highest level of activity - Lowest level of activity)
Variable Cost per minute = ($3,000 - $2,400) / (400 - 200)
Variable Cost per minute = $3.00

Fixed Cost = Highest bill - Variable Cost per minute * Highest level of activity
Fixed Cost = $3,000 - $3.00 * 400
Fixed Cost = $1,800

So, fixed portion in total cost is $1,800