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18 June, 04:48

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 CostJanuary 375 $5,300February 500 5,850March 350 5,200April 600 6,250May 325 5,150June 475 5,700July 525 6,100August 575 6,300September 450 5,550Required: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 400 cavities.

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  1. 18 June, 05:47
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    Instructions are listed below

    Explanation:

    Giving the following information:

    The high-low method involves taking the highest level of activity and the lowest level of activity and comparing the total costs at each level.

    Mountain has recorded the following for the past nine months:

    January:

    Number of Cavities = 375

    Total cost = $5,300

    February:

    Number of Cavities 500

    TC = 5,850

    March

    Number of Cavities 350

    TC = 5,200

    April

    Number of Cavities 600

    TC=6,250

    May

    Number of Cavities 325

    TC = 5,150

    June

    Number of Cavities 475

    TC = 5,700

    July

    Number of Cavities 525

    TC = 6,100

    August

    Number of Cavities 575

    TC = 6,300

    September

    Number of Cavities 450

    TC = 5,550

    A) Variable cost = (Highest activity cost - lowest activity cost) / (Highest activity units - lowest activity units)

    Variable cost = (6300 - 5150) / (600 - 325) = 4.18 per unit

    Fixed cost = HACost - (variable cost per unit * HAUnits) = 6300 - (4.18*600) = 3792

    Fixed cost = LACost - (variable cost per unit * LAUnits) = 5150 - (4.18*325) = 3792

    B) Q = 400

    Total cost = 3792 + 4.18*400 = $5464
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