Question

Bruno Company accumulates the following data converning a mixed cost, using miles as the activity level.

.......................Miles Driven......................Total Cost

January........... 8,000...................................$14,150

February..........7,500...................................$13,500

March..............8,500.................................. $15,000

April................. 8,200................................. $14,490

Compute the variable - and fixed-cost elemts using the high-low method.

Answer 1

The answer is stated below:

Step-by-step explanation:

Taking the highest and second lowest cost and miles driven as:

Cost = Highest - Lowest

Cost = $15,000 - $14,150

Cost = $850

Miles Driven = Highest - Lowest

Miles driven = 8,500 - 8,000

Miles Driven = 500

So,

= Cost / Miles driven

= $850 / 500

= $1.70

Total Cost would be 15,000 and 13,500

So, computing the variable cost as:

Variable cost of highest cost (VC) = Miles driven of $15,000 cost × $1.70

VC = 8,500× $1.70

VC = $14,450

Variable cost of lowest cost (VC) = Miles driven of $13,500 cost × $1.70

VC = 7,500× $1.70

VC = $12,750

Computing fixed cost as:

Fixed cost of highest cost = Total cost - VC

= $15,000 - $14,450

= $550

Fixed cost of lowest cost = Total cost - VC

= $13,500 - $12,750

= $750