High-Low Method [LO 2] Campus Copy & Printing wants to predict copy machine repa

Question

High-Low Method [LO 2]

Campus Copy & Printing wants to predict copy machine repair expense at different levels of copying activity (number of copies made). The following data have been gathered:


Copy Machine
Month Repair Expense Copies Made
May $10,812 381,600
June 15,900 636,000
July 26,076 1,144,800
August 20,988 890,400
September 13,356 508,800

Determine the fixed and variable components of repair expense using the high-low method. Use copies made as the measure of activity. (Enter variable cost per dollar to 2 decimal places, e.g. 0.52.)

Variable repair cost $
Fixed repair cost $

Explanation / Answer

Highest: July $26,076 with copies of 1,144,800 Lowest: May $10,812 with copies of 381,600 Difference in cost = $26,076-$10,812 -> $15,264 Difference in copies = 1,144,800 – 381,600 -> 763,200 Variable cost per unit = $15,264/763,200 copies -> $0.02 Total cost = Fixed cost + Variable cost $10,812 = Fixed cost + (381,600 copies x $0.02) $10,812 = Fixed cost + $7,632 Fixed cost = $3,180 Variable repair cost $0.02 Fixed cost = $3,180 Variable repair cost $0.02 Hope this helps

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