Question

Kuwait Dental Clinic has incurred the following overhead costs during the past year.

Month	Number of Dental tests	Overhead costs (Y)	Month	Number of Dental tests	Overhead costs (Y)
January	9,800	173,500	July	13,000	190,200
February	6,000	155,200	August	9,500	171,900
March	6,800	169,100	September	9,500	173,400
April	7,500	170,400	October	8,700	170,800
May	9,200	172,300	November	14,000	195,200
June	10,200	175,900	December	13,500	198,800

Required: Use the high-low method,

1. What is the variable overhead costs per one test?
2. What is the total fixed overhead costs of the Clinic?
3. Predict the level of Clinic’s overhead costs that would be incurred during a month when 17,000 tests are taken.

please make sure to solve all parts clearly and it's correct 100%

Answer 1

Answer A: Calulation of Variable overhead costs per one test:-

		As per High Low Method
Variable Cost per unit	=		Highest Activity Cost - Lowest Activity Cost
			Highest Dental Tests - Lowest Dental Tests
	=		198800 - 155200
			14000 - 6000
	=		43600
			8,000
Variable Cost per one test	=		5

Answer B: Calulation of Total Fixed overhead costs of the clinic

= Total Overhead Cost  (-) Total Variable Overhead Cost

= 2,116,700 {Refer Note 1} (-) 588,500 {Refer Note 2}

= 1528200

Note 1 :    

As given in the question
Month	Number of Dental Tests	Total Overhead Costs
January	9800	173,500
February	6000	155,200
March	6800	169,100
April	7500	170,400
May	9200	172,300
June	10200	175,900
July	13000	190,200
August	9500	171,900
September	9500	173,400
October	8700	170,800
November	14000	195,200
December	13500	198,800
	117,700	2,116,700

Note 2 : Total Variable Overhead Cost = Number of tests *Variable Cost per test

= 5* 117,700

= 588,500

Answer C: Level of Clinic’s overhead costs that would be incurred during a month when 17,000 tests are taken is between $209,400 to $2201,00

Calculations :

Month	Number of Dental Tests	Variable Cost Per unit	Total Variable OverheadCosts	Total Fixed OverheadCosts	Total Overhead Costs
	(A)	(B)	C= (A)*(B)	(D)	(C)+(D)
January	17000	5	85000	124,500	209,500
February	17000	5	85000	125,200	210,200
March	17000	5	85000	135,100	220,100	Highest
April	17000	5	85000	132,900	217,900
May	17000	5	85000	126,300	211,300
June	17000	5	85000	124,900	209,900
July	17000	5	85000	125,200	210,200
August	17000	5	85000	124,400	209,400	Lowest
September	17000	5	85000	125,900	210,900
October	17000	5	85000	127,300	212,300
November	17000	5	85000	125,200	210,200
December	17000	5	85000	131,300	216,300