Question

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 $530,900 224,000 February 591,900 250,000 March 418,300 162,000 April 567,500 242,000 May 476,000 195,000 June 610,200 263,000 Determine the variable cost per gross-ton mile and the total fixed cost. Variable cost (Round to two decimal places.) $ per gross-ton mile Total fixed cost $

Answer 1

Variable cost= $ 1.90 per gross-ton mile

Total fixed cost= $ 110,500

Working

		Cost	No. of activities
A	High Level	$     6,10,200.00	263000
B	Low Level	$     4,18,300.00	162000
C=A-B	Difference	$     1,91,900.00	101000
A	Cost difference	$     1,91,900.00
B	No. of Activities difference	101000
C=A/B	Variable cost per unit	$                   1.90

		High Level	Low Level
A	No. of activities	263000	162000
B	Variable cost per unit	$                   1.90	$                1.90
C=AxB	Total Variable cost	$     4,99,700.00	$ 3,07,800.00
D	Total cost	$     6,10,200.00	$ 4,18,300.00
E=D-C	Total fixed cost	$     1,10,500.00	$ 1,10,500.00