Question

Franklin Computer Services, Inc. has been in business for six months. The following are basic operating data for that period:

	Month
	July			Aug.			Sept.			Oct.			Nov.			Dec.
Service hours		118			134			262			420			322			328
Revenue	$	6,254		$	7,102		$	13,886		$	22,260		$	17,066		$	17,384
Operating costs	$	4,260		$	5,260		$	7,150		$	11,100		$	9,130		$	10,530

Required

What is the average service revenue per hour in each month and the overall average for the six-month period?

Use the high-low method to estimate the total monthly fixed cost and the variable cost per hour.

Determine the average contribution margin per hour.

Answer 1

Requirement 1
		Month
		July		Aug.		Sept.		Oct.		Nov.		Dec.		Average
Service hours	A		118		134		262		420		322		328	264
Revenue	B	$	6,254	$	7,102	$	13,886	$	22,260	$	17,066	$	17,384	13,992
Average service revenue Per Hour	C= B/A	$	53	$	53	$	53	$	53	$	53	$	53
Overall average revenue per hour for the six month period														53

Requirement 2
using High -Low Method
Variable cost Per hour = (11,100-4,260) /(420-118)
Variable cost Per hour = 22.65 Per Unit
Total Monthly fixed cost = 11100-(420X22.65)
Total Monthly fixed cost = $1,587
Requirement 3
	Per hour
Average service revenue Per Hour	53.00
Variable cost Per hour	22.65
Average contribution per hour	30.35