The number of Xrays and Xray costs over the last nine months
The number of X-rays and X-ray costs over the last nine months in Beverly Hospital are given below: Month X-Ray Costs X-Rays Taken January $26,000 6,250 February 29,000 7,500 March 22,000 5,000 April 20,700 4,250 May 21,000 4,500 June 24,000 5,500 July 19,200 3,750 August 16,000 2,500 September 24,600 5,750 Beverly Hospital expects to take 5,900 X-rays during October. Using the high-low method, calculate Beverly Hospital\'s expected X-ray cost for October.
Solution
Variable cost per unit=[Total cost at highest level-Total cost at lowest level]/(Highest level-Lowest level)
=(29000-16000)/(7500-2500)
=$2.6 per X-Ray
Total fixed cost=29000-(7500*2.6)
=$9500
Hence expected X-ray cost for October=Variable cost+Fixed cost
=(2.6*5900)+9500
=$24840.
NOTE:Variable cost per unit and Total fixed costs do not change with change in units.
