Question - High-Low method for a service company
Boston Railroad decided to use the high-low method and operating data from the past six months to estimate the fixed and variable components of transportation costs. The activity base used by Boston Railroad is a measure of railroad operating activity, termed "gross-ton miles," which is the total number of tons multiplied by the miles moved.
|
|
Transportation Costs
|
Gross-Ton Miles
|
|
January
|
$1,776,000
|
560,000
|
|
February
|
2,700,000
|
1,000,000
|
|
March
|
1,650,000
|
500,000
|
|
April
|
1,860,000
|
600,000
|
|
May
|
1,440,000
|
400,000
|
|
June
|
1,566,000
|
460,000
|
Determine the variable cost per gross-ton mile and the total fixed cost.