Question

Luisa Crimini has been operating a beauty shop in a university town for the past 10 years. Recently, Luisa rented space next to her shop and opened a spray-tanning salon. She anticipated that the costs for the spray-tanning service would primarily be fixed but found that spray-tanning salon costs increased with the number of appointments. Costs for this service over the past eight months are as follows:
Spray-Tanning Appointments Total Cost
January 1,600               $ 1,754
February 2,000              2,140
March 3,500    2,790
April 2,500                    2,400
May 1,500                   1,790
June 2,300                  2,275
July 2,150                   2,200
August 3,000 2,640
Required
(A) Using the high-low method, compute the variable rate for tanning. Compute the fixed cost per month.   
(B) Write the cost formula for spray-tanning services based on Requirement A.                                                      
(C) Calculate the total predicted cost of spray-tanning services for September for 2500 appointments.   
(D) How much is the total fixed cost for September? How much is the total predicted variable cost for September?
(E) Identify and briefly explain any additional issues that Luisa might be wise to consider when using the high-low method to estimate the costs of her spray-tanning salon.

could u show me the whole solutions of this question?plz   

Answer 1

Part A
	Spray-Tanning Costs
		No. of Appointments	Total Costs
	High level of activity	3,500	$2,790
	Low level of activity	1,500	$1,790
	Change	2,000	$1,000
	Variable cost per appointment =$1,000 / 2000 =$0.50 per appointment
	Fixed cost element =$2,790 - (3500*$0.50) =$1,040
Part B	The Cost formula is Y =$1,040 + $0.40X
Part C	Total Cost of Spray-Tanning for September =$1,040 + $0.50*2500 =$2,290
Part D	For September Total Variable Cost is $1,250($0.50*2500) and Fixed Cost is $1040
Part E	The high low method only considers the extreme ends of the cost(Highest and lowest) and hence it does not show the true cost at various volumes which occurs
	most frequently.