Final answer:
Using the high-low method, the total fixed costs for the cafeteria area of Foothill Hospital are determined to be $2,000 after calculating the variable cost per meal and subtracting total variable costs from the total cost at the highest activity level.
Step-by-step explanation:
To determine the total fixed costs for the cafeteria area using the high-low method, we must first identify the highest and lowest levels of activity (meals served) and their corresponding total costs. According to the data provided, the highest activity is 1,900 meals with a total cost of $5,800, and the lowest activity is 1,000 meals with a total cost of $4,000.
The formula to calculate the variable cost per unit is:
(Cost at highest activity level - Cost at lowest activity level) / (Highest activity level - Lowest activity level) = Variable cost per unit
Applying the numbers, we get: ($5,800 - $4,000) / (1,900 meals - 1,000 meals) = $1,800 / 900 meals = $2 per meal
Next, we compute the total variable cost at the highest activity level:
1,900 meals * $2 per meal = $3,800
The fixed cost is then determined by subtracting the total variable cost from the total cost at the highest activity level:
$5,800 (Total cost at highest level) - $3,800 (Total variable cost) = $2,000
Therefore, the total fixed costs for the cafeteria area are $2,000, which is option c.