Supply costs at Lattea Corporation's chain of gyms are listed below: Client-Visits Supply Cost March 11,657 $28,571 April 11,453 $28,405 May 11,985 $28,829 June 13,000 $28,912 July 11,717 $28,632 August 11,203 $28,231 September 11,997 $28,830 October 11,688 $28,588 November 11,836 $28,713 Management believes that supply cost is a mixed cost that depends on client-visits. Use the high-low method to estimate the variable and fixed components of this cost, Compute the variable component first, rounding off to the nearest whole cent. Then compute the fixed component, rounding off to the nearest whole dollar. Those estimates would be closest to:

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Dryomys Dryomys · Answer 1 · 2020-02-17T07:59:24+01:00

Answer:

$0.38 per client visit; $23,972 per month

Explanation:

Highest client visits and supply costs are in the month of June:

Client visits in June = 13,000

Supply costs in June = $28,912

Lowest client visits and supply costs are in the month of August:

Client visits in August = 11,203

Supply costs in August = $28,231

Variable component, using high-low method:

variable supply cost per client visit:

= ($28,912 - $28,231) ÷ (13,000 - 11,203)

= $681 ÷ 1,797

= $0.38

Fixed component:

Total variable supply cost for June:

= Client visits in June × variable supply cost per client visit

= 13,000 × $0.38

= $4,940

Fixed supply cost:

= Total supply cost in June - Total variable cost in June

= $28,912 - $4,940

= $23,972 per month