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 | $614,200 | 246,000 | ||

February | 684,800 | 275,000 | ||

March | 484,000 | 178,000 | ||

April | 656,600 | 266,000 | ||

May | 550,700 | 214,000 | ||

June | 706,000 | 289,000 |

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

HIGH - LOW METHOD | ||

UNDER THIS METHOD, COSTS AT HIGHEST LEVEL OF | ||

ACTIVITY AND LOWEST LEVEL OF ACTIVITY ARE | ||

COMPARED TO FIND OUT VARIABLE AND FIXED COSTS | ||

PORTION | ||

VARIBLE COST PER UNIT= | (COST AT HLA - COST AT LLA) | |

HLA- LLA | ||

HLA IS HIGHEST LEVEL OF ACTIVITY I.E., 289000 GROSS TON MILES | ||

LLA IS LOWEST LEVEL OF ACTIVITY I.E., 178000 GROSS TONMILES | ||

VARIBLE COST PER UNIT= | 706000-484000 | |

289000-178000 | ||

= | 2 | |

FIXED COST = TOTAL COST - TOTAL VARIABLE COST | ||

AT 289000 GROSS TON MILES | ||

FIXED COST = | 706000-(289000*2) | |

= | 128000 |

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
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432,000
March
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April
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May
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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
277,000
June
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