Question

Jones Ice Cream Stand is operated by Mr. Jones and experiences different sales patterns throughout the year. To plan for the​future, Mr. Jones wants to determine its cost behavior patterns. He has the following information available about the ice cream​stand's operating costs and the number of soft serve cones servedUsing the high- low method , the fixed cost for a month are?MONTH NUMBER OF ICE CREAM CONES TOTAL OPERATING COSTAPRIL 800 950MAY 825 975JUNE 1125 1000JULY 2000 1250AUGUST 1500 1875SEPTEMBER 900 1500Please explain you answer!A) 2,200 B)750C) 300

Answer 1

B) 750

Step-by-step explanation:

High Low method is one of the methods to estimate cost. This method analyzes high level of activity and low level of activity and then compares it with cost at each level of activity. The variable cost per ice cream will be calculated by the formula given below,

The variable cost per Ice cream = (High Cost - Low cost) / (High units - Low units

The variable cost per unit is 0.25 per ice cream.

Total variable cost for the month is $800* 0.25 = $200

The fixed cost for the month is $950 - $200 = $750