Question

Sherri's Tan-O-Rama is a local tanning salon. The following information reflects its number of appointments and total costs for the first half of the year: Number of Appointments 300 375 Month January February March April May June Total Cost $6,050 7,000 6,400 5,600 5,800 5,350 450 250 325 275 Using the high-low method, calculate the total fixed cost per month and the variable cost per tanning appointment. (Round your "Variable Cost per Unit" answer to 2 decimal places and "Fixed Cost" answer to the nearest dollar amount.) Variable Cost per Unit Fixed Cost

Answer 1

Explanation:

High - Low method

We subtract high from low

High 450 6,400

Low 250. 5,600

Difference 200 800

The difference tell us 200 appointments generate 800 additional cost

So, we can calculate variable cost = 800/200

Variable cost per unit =$4

Now on low or high we can find Fixed cost

Total cost = 4×250 + Fixed cost

Total cost =5,600

Variable cost = 1000

Fixed cost =4,600

Or

cost = 4 ×450+ Fixed cost

Total cost =6,400

Variable cost = 1,800

Fixed cost = 4,600

Variable cost per unit	$4
Fixed cost	$4,600

____×____

All the best