Question

Campus Copy & Printing wants to predict copy machine repair expense at different levels of copying activity (number of copies made). The following data have been gathered:

Copy Machine

                                             Month           Repair Expense                Copies Made

May	$ 9,000	300,000
June	13,000	550,000
July	22,000	950,000
August	17,000	750,000
September	10,500	400,000

Required

Determine the fixed and variable components of repair expense using the high-low method. Use copies made as the measure of activity. Round cost per copy to two decimal places.

Answer 1

Solution

Variable cost per employee	$ 0.02 per copy
Fixed cost	$              3,000

Working

		Cost	No. of activities
A	High Level	$          22,000.00	950000
B	Low Level	$             9,000.00	300000
C=A-B	Difference	$          13,000.00	650,000
A	Cost difference	$          13,000.00
B	No. of activities difference	650000
C=A/B	Variable cost per unit	$                     0.02
		High Level	Low Level
A	No. of activities	950000	300000
B	Variable cost per unit	$                0.0200	$                  0.0200
C=AxB	Total Variable cost	$          19,000.00	$              6,000.00
D	Total cost	$          22,000.00	$              9,000.00
E=D-C	Total fixed cost	$             3,000.00	$              3,000.00