Question

High-Low Method for a Service Company

Boston Railroad decided to use the high-low method and operating data from the past six months to estimate the fixed and variable components of transportation costs. The activity base used by Boston Railroad is a measure of railroad operating activity, termed “gross-ton miles,” which is the total number of tons multiplied by the miles moved.

Transportation Costs |
Gross-Ton Miles |
|||

January | $1,452,500 | 387,000 | ||

February | 1,619,400 | 432,000 | ||

March | 1,144,500 | 280,000 | ||

April | 1,552,600 | 419,000 | ||

May | 1,302,200 | 337,000 | ||

June | 1,669,500 | 455,000 |

Determine the variable cost per gross-ton mile and the fixed cost.

Variable cost (Round to two decimal places.) | $ per gross-ton mile |

Total fixed cost | $ |

Answer #1

Variable cost = [Transportation cost at highest gross ton miles-Transportation cost at lowers gross ton miles]/[Highest gross ton miles -Lowest gross ton miles] | ||

= (1669500-1144500)/(455000-280000) = | $ 3.00 | Per gross ton mile |

Fixed cost = Transportation at highest gross ton miles-Highest gross ton mile*Variable cost per gross ton mile = 1669500-455000*3 = | $ 3,04,500 |

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Boston Railroad decided to use the high-low method and operating
data from the past six months to estimate the fixed and variable
components of transportation costs. The activity base used by
Boston Railroad is a measure of railroad operating activity, termed
“gross-ton miles,” which is the total number of tons multiplied by
the miles moved.
Transportation Costs
Gross-Ton Miles
January
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February
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March
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Boston Railroad decided to use the high-low method and operating
data from the past six months to estimate the fixed and variable
components of transportation costs. The activity base used by
Boston Railroad is a measure of railroad operating activity, termed
“gross-ton miles,” which is the total number of tons multiplied by
the miles moved. Transportation Costs Gross-Ton Miles
January $1,336,200 356,000
February 1,489,800 398,000
March 1,052,900 258,000
April 1,428,400 385,000
May 1,198,000 310,000
June 1,535,900 419,000
Determine the variable...

Boston Railroad decided to use the high-low method and operating
data from the past six months to estimate the fixed and variable
components of transportation costs. The activity base used by
Boston Railroad is a measure of railroad operating activity, termed
“gross-ton miles,” which is the total number of tons multiplied by
the miles moved.
Transportation Costs
Gross-Ton Miles
January
$836,600
318,000
February
932,800
355,000
March
659,200
230,000
April
894,300
344,000
May
750,000
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June
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