Question

The phone bill for a company consists of both fixed and variable costs. Refer to the four-month data below and apply the high-low method to answer the question. Minutes Total Bill January 480 $4,000 February 200 $2,700 March 170 $2,640 April 320 $2,855 What is the fixed portion of the total cost? (Round any intermediate calculations to the nearest cent, and your final answer to the nearest dollar.)

Answer 1

$1,892.8

Step-by-step explanation:

Variable cost per minute:

= Change in cost ÷ Change in minute

= (4,000 - $2,640) ÷ (480 - 170)

= 1,360 ÷ 310

= 4.39 per minute

Fixed cost:

= January total bill - (January minutes × Variable cost per minute

= 4,000 - (480 × 4.39)

= 4,000 - 2,107.2

= $1,892.8

Therefore, the fixed portion of the total cost is $1,892.8