Question

A wholesaler of custom-built air-conditioning units for commercial buildings gathered the following monthly data relating to units shipped and total shipping expense: Month January February March April May June July Unita shipped 2 5 3 4 6 7 1 Total shipping expense $2,000 $2,500 $1,900 $2,200 $2,500 $3,060 $1,400 Using the high-low method estimate the cost formula for shipping expenses, calculate the variable shipping expense as well as fixed shipping expense per unit. (All answers are whole numbers -- unless specified otherwise. You should NOT include the $ sign or a comma. E.g. you should type 1000 for one thousand. Negative numbers should be added with a minus sign. c.g. -1000 for a decrease or loss of one thousand.) Variable shipping expense - $ per unit. Fixed shipping expense - $ per unit.

Answer 1

			Shipping	Units
			Expense	shipped
High Activity-June		3060	7
Low activity-July		1400	1
Change			1660	6
Variable cost per Unit shipped: Change in Shipping cost / Change in Units shipped
			1660 / 6 units = $ 276.67 per unit
Fixed Shipping expense:
Total Cost at high activity	3060
Less: Variable cost (7*276.67)	1937
Total Fixed shipping expense	1123
Final Answer:
Variable Shipping expense:	276.67	per unit
Fixed Shipping expense:	1123