Question

E5-7 (Algo) Estimating Cost Behavior Using High-Low Method [LO 5-3] Mountain Dental Services is a specialized dental practice whose only service is filling cavities. Mountain has recorded the following for the past nine months: Month January February March April May June July August September Number of Cavities Filled Total Cost 300 $5,100 375 5,300 625 6,350 400 5, 200 650 6,300 600 6,300 350 675 6,300 550 6,000 5,000 Required: 1. Use the high-low method to estimate total fixed cost and variable cost per cavity filled. 2. Using these estimates, calculate Mountain's total cost for filling 700 cavities. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Use the high-low method to estimate total fixed cost and variable cost per cavity filled. (Round your Variable cost per unit to 2 decimal places.) Fixed Cost Variable Cost per cavity filled

Answer 1

1.

Variable cost per cavity filled = (Highest activity cost - Lowest activity cost)/(Highest activity - Lowest activity)

= (6,300 - 5,100)/((675 - 300)

= 1,200/375

= $3.2 per cavity filled

Fixed cost = Highest activity cost - (Highest activity x Variable cost cavity filled)

= 6,300 - (675 x 3.2)

= 6,300 - 2,160

= $4,140

2.

Total cost = Fixed cost + Number of cavity filled x Variable cost per cavity filled

= 4,140 + 700 x 3.2

= 4,140 + 2,240

= $6,380

Thus, when 700 cavities are filled, total cost will be $6,380

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