Question

High-Low Method

Impeccable Puppy Training, Inc. provides classes that are popular with dog owners. The number of classes offered over five months, along with the total costs of offering these classes, follows:

                                       Classes Offered            Costs Incurred

   April                                       10                            $9,500

   May                                       8                          $9,000

June                                       20                          $18,000

July                                          13                           $12,000

August                                     18                           $17,500

         

1. Using the high-low method, determine AND state the cost formula (3 points):

2. Using the cost formula, determine the total cost of offering 25 puppy training classes in September (3 points):

Answer 1

		Classes	Cost
	High LEVEL	20	18,000
	Low Level	8	9,000
	Change	12	9000
	Change per unit (Variable cost) =Change in Cost/ Change in Classes
	Change in Cost	9000
	Change in Classes	12
	Variable cost per unit	750.00
	Fixed Cost calculation
	Cost at High LEVEL	18,000
	Less : Variable cost	(15,000)
	Fixed cost	3,000
1)	Cost formula : Total cost = 3000 + 750*no. of class
2)	cost of offering 25 puppy training classes
	Variabe cost	18,750
	Fixed cost	3,000
	Total cost	21,750