Question

Fulton and Sons, Inci presently leases a copy machine under an agreement that calls for a fixed fee each mionth and a charge for each copy made. Fulton made 10.000 copies and pald a totat of $620 in Marchi in May. the firm paid $570 for 8,000 copies. The company uses the highilow inethod to analyze costs. How much would Fulton pay if it made 9,000 coples? (Round your intermediate calculations to 3 decimal places and final answer to 2 decimal ploces.) Militiple Chose

a.$540250
b.$534200
c.$59500
d.$530250

Answer 1

The correct answer is c. $595.00.

Step-by-step explanation:

To analyze costs using the high-low method, we need to identify the variable cost per unit and the fixed cost. Given that Fulton made 10,000 copies for $620 in March (the high activity level), and 8,000 copies for $570 in May (the low activity level), we can calculate the variable cost per copy as follows:

Variable Cost per Copy = (Cost at High Activity Level - Cost at Low Activity Level) / (High Activity Level - Low Activity Level)

Variable Cost per Copy = ($620 - $570) / (10,000 copies - 8,000 copies)

Variable Cost per Copy = $50 / 2,000 copies

Variable Cost per Copy = $0.025 per copy

Next, we calculate the fixed cost by subtracting the total variable cost at one of the activity levels from the total cost:

Fixed Cost = Total Cost - (Variable Cost per Copy × Number of Copies)

Using the information from March:

Fixed Cost = $620 - ($0.025 × 10,000)

Fixed Cost = $620 - $250

Fixed Cost = $370

The total cost for making 9,000 copies can now be determined:

Total Cost = Fixed Cost + (Variable Cost per Copy × Number of Copies)

Total Cost = $370 + ($0.025 × 9,000)

Total Cost = $370 + $225

Total Cost = $595.00