Using High-Low to Calculate Fixed Cost, Calculate the Variable Rate, and Construct a Cost Function...
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Using High-Low to Calculate Fixed Cost, Calculate the Variable Rate, and Construct a Cost Function
Speedy Petes is a small start-up company that delivers high-end coffee drinks to large metropolitan office buildings via a cutting-edge motorized coffee cart to compete with other premium coffee shops. Data for the past 8 months were collected as follows:
Month
Delivery Cost
Number of Deliveries
May
$63,450
1,800
June
67,120
2,010
July
66,990
2,175
August
68,020
2,200
September
73,400
2,550
October
72,850
2,630
November
75,450
2,800
December
73,300
2,725
Speedy Petes controller wants to calculate the fixed and variable costs associated with its cutting-edge delivery service.
Required:
1. Using the high-low method, calculate the fixed cost of deliveries.
2. Using the high-low method, calculate the variable rate per delivery.
3. Using the high-low method, construct the cost formula for total delivery cost.
Total Delivery Cost =
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