Question

The manager of the main laboratory facility at CliFit Center is interested in being able to predict the overhead costs each month for the lab. The manager believes that total overhead varies with the number of lab tests performed but that some costs remain the same each month regardless of the number of lab tests performed. The lab manager collected the following data for the first seven months of the year. Click the icon to view the data.) Use the high low method to determine the laboratory's cost equation for total laboratory overhead. Use your resuts to predict total laboratory overhead it 2,900 lab tests are performed next month. Lers begin by determining the formula that is used to calculate the variable cost (slope) • Variable cost (ope) Now determine the formula that is used to calculate the fixed cost component. Food cost Use the high-low method to determine Cafits operating Question Viewend the variable cost to the nearest cont.) ys Use the operating cost equation you determined above to predict total laboratory overhead it 2,000 lab tests are performed next month The total laboratory overhead at a volume of 2.900 lab tests is

Answer 1

1.)	Variable Cost (slope)	9,000	/	2,500	=	3.60
	( Change in Cost / Change in activity level )	(28500-19500)		(3700-1200)		(9000/2500)
2.)	Fixed Cost	28,500	-	13,320	=	15,180
	( Total Cost - Variable Cost )			=3700*3.6
3.)	Y = $ 3.60 x + $ 15,180
4.)	Total labroratory overhead at 2,900	$ 25,620
	(15180+(2900*3.6) )