Shems Tan-O-Rama is a local tanning salon The following information reflects its

Question

Shems Tan-O-Rama is a local tanning salon The following information reflects its number of appointments and total costs for the first hailf of the year Number of January February March April May June Appointments Cost 5,100 6,750 6,000 6,350 6,500 6,550 200 500 300 275 325 400 Using the high-low method, calculate the total fixed cost per month and the variable cost per tanning appointment (Round your "Variable Cost pe and "Fixed Cost" answer to the nearest dollar amount Une" nswer to 2 decimal places Variable Cost per Unit Fixed Cost

Explanation / Answer

variable cost per unit = [Total cost at highest no. of appointment - Total cost at lowest no. of appointment ] / [ highest no. of appointment - lowest no. of appointment]

= [$6750 - $5100 ] / [500-200]

= $1650 / 300

= $5.5 per unit

Fixed cost = $6750 - variable cost * 500 = $5100 - variable cost * 200

=$6750 - $5.5 * 500 = $5100 - $5.5 * 200

=$6750 - $2750 = $5100 - $1100

=$4000 = $4000

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