Question

101Wing Mathematical Problems ulllllig 2/2562 1. Aor Hardware Inc, operates a chain of four retail stores. Data on the company's maintenance for its store buildings and furnishings are as follows: Month Maintenance Cost January February March April May June $53,000 $55,000 $47,000 $51,000 $45,000 $49,000 Sales $600,000 700,000 550,000 650,000 500,000 610,000 Using the high-low method, estimate and graph the cost behaviour for the firm's mainte

Answer 1

The highest sales is $55,000 and lowest sales is $45,000

The highest maintenance cost is $700,000 and lowest maintenance cost is $ 500,000

Highest maintenance cost - Lowest maintenance cost Variable rate = Hightest sales - Lowest sales

$55,000 - $45,000 Variable rate = $700,000 - $500,000 1,000 - $500,000 = 0.05

Fixed cost = Maintenance cost at highest sales - variable rate $\times$ sales at highest maintenance cost

Fixed cost = $ 55,000 - 0.05 $\times$ $ 700,000

Fixed cost = $ 20,000

Total cost = Fixed cost + variable cost

Total cost = $ 20,000 + 0.05 $\times$ Sales

Using the above equation, the maintenance cost for each month is obtained as shown in the table

Month	Estimated Maintenance cost	Sales
January	$50,000	$600,000
February	$55,000	700,000
March	$47,500	550,000
April	$52,500	650,000
May	$45,000	500,000
June	$50,500	610,000

Scattergraph $60,000 y = 0.05x + 20000... $50,000 $40,000 Maintenance cost $30,000 $20,000 $10,000 $0 $100,000 $200,000 $300,000 $400,000 $500,000 $600,000 $700,000 $800,000 Sales