Problem 5 – 10 points The following are monthly totals taken from the log of a c

Question

Problem 5 – 10 points

The following are monthly totals taken from the log of a colorphotocopying machine used by the Skywalker Company. Cost wasbased on a flat fee plus a cost per copy made after a minimumnumber of copies had been made each month.

Month                         # ofcopies                  Total cost

January                            35,200                        $10,800

February                     30,400                            9,600

March                         32,900                         10,225

April                            40,300                         12,075

May                            38,400                         11,600

June                            48,900                         14,225

Part a

To differentiate the variable and fixed costs in the use of thismachine for future planning, use the high-low method to determinethe variable cost per copy and compute the flat fee.

Part b

Calculate the total cost for using the photocopying machine if44,000 copies are made.

Explanation / Answer

Part a High-low method 14,225-9,600 48,900-30,400 variable cost =0.25 / unit Total cost = 14,225 , 48,900 copies Fixed cost = Total cost - Variable cost                =14,225 - (48,900 * 0.25)                   = 14,225 - 12,225 Fixed cost = 2,000 Part b Total cost if 44,000 copies are made Total cost = VC + FC Total cost =( 44,000*0.25) + 2,000               = 13,000

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