Question

Oak Island Amusements Center provides the following data on the costs of maintenance and the number of visitors for the last three years:Number of Visitors per Year: (thousands) Maintenance Costs ($000)1,925 $3,535 2,105 3,868 4,325 7,615Required:a. Use the high-low method to estimate the fixed cost of maintenance annually and the variable cost of maintenance per visitor. (Enter your answers in dollars not in thousands of dollars. Round "Variable cost" answer to 2 decimal places.) b. The company expects a record 2,800,000 visitors next year. What would be the estimated maintenance costs? (Enter your answer in dollars not in thousands of dollars.)

Answer 1

formula for maintenance cost:

maintenance cost = 1.7 visitors + 262.5

cost for 2,800,000 visitors $5,022,500

Step-by-step explanation:

We find and subtract low from high:

`\left[\begin{array}{ccc}High&4325&7615\\Low&1925&3535\\Diference&2400&4080\\\end{array}\right]`

With that we solve for the slope which is the variable cos:

cost 4080

Unis 2400

variable cost 1.7

now, we solve for the fixed cost:

Total Cost 7615.00

Variable 4325 x 1.7 = 7352.50

Fixed Cost 262.50

expected cost for 2,800 visitors:

(2800 x 1.7 + 262.5) x 1,000 = 5,022,500‬