In: Accounting
The number of X-rays taken and X-ray costs over the last nine months in a hospital are given below:
Month X-Rays Taken X-Ray Costs
January 6,250 $28,000
February 7,000 $29,000
March 5,000 $23,000
April 4,250 $20,000
May 4,500 $22,000
June 3,000 $17,000
July 3,750 $18,000
August 5,500 $24,000
September 6,750 $28,500
Using the high-low method, what is the hospital’s estimated monthly fixed X-ray cost?
X-Rays Taken |
X-Rays cost |
||
High activity level (February) (A) |
7,000 |
$29,000 |
|
Low activity level (June) (B) |
3,000 |
$17,000 |
|
Change in how - low activity (C=A-B) |
4,000 |
$12,000 |
|
Variable cost per unit: change in cost / change in activity |
|||
change in cost (A) |
$12,000 |
||
change in activity (B) |
4,000 |
||
Variable cost per unit (C=A/B) |
$3 |
||
Fixed cost per month |
|||
Total X ray cost at 7,000 units activity |
$29,000 |
||
Less: Variable cost (7,000 units*$3 variable cist per unit) |
$21,000 |
||
Fixed cost per month |
$8,000 |
||
Ans |
Fixed cost per month |
$8,000 |