Question

Louis Petit, a manager of Doggone Gorgeous, Inc., was reviewing the water bills of a dog daycare and spa. He determined that its highest and lowest bills of $3,800 and $2,000 were incurred in the months of May and November, respectively. If 600 dogs were washed in May and 200 dogs were washed in November, what was the fixed cost associated with the company's water bill? (Round any intermediate calculations to the nearest cent and your final answer to the nearest dollar.)

Answer 1

The fixed cost associated with Doggone Gorgeous, Inc.'s water bill is calculated using the high-low method, resulting in a fixed cost of $1,100.

Step-by-step explanation:

Determining the Fixed Costs of Doggone Gorgeous, Inc.

To calculate the fixed cost associated with the company's water bill, we have to analyze the costs incurred at different levels of production (number of dogs washed), which is similar to identifying the fixed costs of operation in businesses such as Doggies Paradise Inc. and The Clip Joint.

Let's apply the high-low method to find the variable cost per dog washed:

1. Calculate the difference in water bills between the high and low months: $3,800 - $2,000 = $1,800.
2. Calculate the difference in the number of dogs washed between the high and low months: 600 dogs - 200 dogs = 400 dogs.
3. Determine the variable cost per dog: $1,800 / 400 dogs = $4.50 per dog.

Now, we can calculate the fixed cost using either the high or low point:

1. Fixed cost using the high point (May): Fixed Cost = Total Cost - (Variable Cost per Dog x Number of Dogs)
2. Fixed Cost = $3,800 - ($4.50/dog x 600 dogs)
3. Fixed Cost = $3,800 - $2,700
4. Fixed Cost = $1,100

Rounding to the nearest dollar, the fixed water bill cost is $1,100.

Answer 2

Fixed cost = $1100

Step-by-step explanation:

given data

Highest bill = $3,800

lowest bills = $2,000

dog washed in May = 600

dog washed in November = 200

to find out

fixed cost associated with the company's water bill

solution

first we get here variable cost that is express as

variable cost = (Highest bill - Lowest bill) ÷ ( Dogs washed may - Dogs washed November ) ...........1

put here value we get

variable cost =
`(3800-2000)/(600-200)`

variable cost = $4.5 per dog

so fixed cost will be here as

Fixed cost = Total cost to wash 600 dogs - Variable cost to wash 600 dogs

Fixed cost = $3800 - $4.5 × 600 dogs

Fixed cost = $3800 - $2700

Fixed cost = $1100