Submitted by: Submitted by andyloo23
Views: 438
Words: 325
Pages: 2
Category: Business and Industry
Date Submitted: 02/13/2013 07:35 AM
Having some trouble and need some help! Hope there is someone out there that can help me!!
Here is the problem:
The number of x-rays taken and x-ray costs over the last nine months at Beverly Hospital are given below:
Month. X-rays taken. X-ray costs
Jan. 6,250. $28,000
Feb. 7,000. 29,000
Mar. 5,000. 23,000
Apr. 4,250. 20,000
May. 4,500. 22,000
June. 3,000. 17,000
July. 3,750. 18,000
Aug. 5,500. 24,000
Sept. 5,750. 26,000
1. Using the high-low method, estimate a cost formula for x-ray costs
2. Using the cost formula you derived above, what x-ray costs would you expect to be incurred during a month in which 4,600 x-rays are taken?
Thank you in advance! :)
2 years ago Report Abuse
JKRB
Best Answer - Chosen by Voters
1. Using the high-low method, estimate a cost formula for x-ray costs
Subtract the lowest cost driver amount and its cost from the the highest cost driver and its cost.
7,000 - 3,000 = 4,000; 29,000 - 17,000 = 12,000
Divide the cost amount by the cost driver amount.
12,000 / 4,000 = $3.00 this is your variable cost
Subtract the variable cost times the high cost driver from the high cost amount.
29,000 - (3.00 x 7,000) = 8,000 this is your fixed cost*
*Note: You can also use the low cost driver and the low cost amount, the answer will come out the same.
So the cost formula will be:
y = 8,000 + 3x
2. Using the cost formula you derived above, what x-ray costs would you expect to be incurred during a month in which 4,600 x-rays are taken?
y = 8,000 + (3 x 4,600)
y = 8,000 + 13,800
y = $21,800 x-ray costs
2 years ago