Total costs at a restaurant are listed below: Customers Served Total Cost March 11,660 $ 28,377...

Total costs at a restaurant are listed below:

	Customers Served		Total Cost
March		11,660	$	28,377
April		11,456	$	28,309
May		11,988	$	28,485
June		13,300	$	28,918
July		11,720	$	28,397
August		11,206	$	28,227
September		12,000	$	28,489
October		11,691	$	28,387
November		11,839	$	28,436

The restaurant's total cost is a mixed cost that depends on customers served. The restaurant's management uses the high-low method to estimate the variable and fixed components of this cost. If the management believes that the restaurant will be able to serve 16,000 customers in December, the restaurant's estimated total cost for December is closest to: (Round your intermediate calculations to 2 decimal places.)

Multiple Choice

$29,944
$32,031
$29,809
$60,718

Expert Solution

Answer:
Variable cost per unit = (Highest Total Cost (-) lowest Total Cost) / ( Highest Cust. Served (-) lowest Cust. Served) = ( $ 28,918 (-) $ 28,227 ) / ( 13,300 (-) 11,206) = $ 691 / 2,094 = $ 0.33 Per unit

Fixed cost = Highest Total Cost (-) ( Highest Cust. Served x Variable cost per unit ) = $ 28,918 (-) ( 13,300 x $ 0.33) = $ 28,918 (-) $ 4,389 = $ 24,529
Particulars	Amount (in $)
Variable cost ( 16,000 Customer x $ 0.33)	$ 5,280
Fixed cost	$ 24,529
Total cost	$ 29,809
Option (C ) is Correct

ekkarill92 answered 1 year ago

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