Question

The ACC Tutoring Service provides tutoring to accounting students.

The volume of tutoring is low at the beginning of the semester and increases before exams.

ACC had its highest level of service in May when they provided 4,300 hours of tutoring at a total cost of $125,000 and it lowest level of service in January when they provided 1,500 hours of tutoring at a total cost of $55,000.

Using the high-low method, the estimated fixed costs are $

Answer 1

$17,500

Step-by-step explanation:

The computation of the fixed cost and the variable cost per hour by using high low method is shown below:

Variable cost per hour = (High tutoring cost - low tutoring cost) ÷ (High service hours - low service hours)

= ($125,000 - $55,000) ÷ (4,300 hours - 1,500hours)

= $70,000 ÷ 2,800 hours

= $25

Now the fixed cost equal to

= High tutoring cost - (High service hours × Variable cost per hour)

= $125,000 - (4,300 hours × $25)

= $125,000 - $107,500

= $17,500