Sherri's Tan-O-Rama is a local tanning salon. The following information reflects its number of appointments and total costs for the first half of the year: Month Number of Appointments Total Cost January 375 5,050 February 350 5,500 March 200 5,200 April 500 7,000 May 400 5,650 June 300 5,200 Using the high-low method, calculate the total fixed cost per month and the variable cost per tanning appointment. (Round your "Variable Cost per Unit" answer to 2 decimal places and "Fixed Cost" answer to the nearest dollar amount.)

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facundobuzzetti facundobuzzetti · Answer 1 · 2020-03-07T05:41:52+01:00

Answer:

Variable cost per unit= $6.5 per unit

Fixed costs= $3,750

Explanation:

Giving the following information:

Month - Number of Appointments - Total Cost

January: 375 $5,050

February: 350 $5,500

March: 200 $5,200

April: 500 $7,000

May: 400 $5,650

June: 300 $5,200

To calculate the variable and fixed costs, we need to use the following formulas:

Variable cost per unit= (Highest activity cost - Lowest activity cost)/ (Highest activity units - Lowest activity units)

Variable cost per unit= (7,000 - 5,050) / (500 - 200)= $6.5 per unit

Fixed costs= Highest activity cost - (Variable cost per unit * HAU)

Fixed costs= 7,000 - (6.5*500)= $3,750

Fixed costs= LAC - (Variable cost per unit* LAU)

Fixed costs= 5,050 - (6.5*200)= $3,750