Question

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	Number of Cavities Filled	Total Cost
January	550	$6,050
February	375	5,200
March	325	5,000
April	500	5,750
May	400	5,400
June	650	6,400
July	625	6,200
August	600	6,200
September	300	5,000

Required:
1. Use the high-low method to estimate total fixed cost and variable cost per cavity filled. (Round your answers to 2 decimal places.)



2. Using these estimates, calculate Mountain’s total cost for filling 450 cavities.

Answer 1

Variable Cost = (Cost at highest activity - Cost at lowest activity) /(Highest activity-Lowest activity)

= (6400-5000)/(650-300)

= 4

Fixed cost = 6400 - (650*4) = 3800

Fixed cost	3800
Variable cost	4

.

Estimated cost = 3800 + (4*450)

= 5600