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Dollywood Corporation accumulates the following data concerning a mixed cost, using miles as the activity level. Miles Driven Total Cost January 10,000 $16,500 February 8,000 $14,500 March 9,000 $12,500 April 7,000 $12,000 Compute the variable and fixed cost elements using the high-low method. (Round variable cost answer to 2 decimal places, e.g. 52.75.) Variable Cost $ per mile Fixed Cost $

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Answer:

Instructions are listed below.

Explanation:

Giving the following information:

Miles Driven Total Cost

January: 10,000 $16,500

February: 8,000 $14,500

March: 9,000 $12,500

April: 7,000 $12,000

First, we need to calculate the unitary variable cost using the following formula:

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

Variable cost per unit= (16,500 - 12,000) / (10,000 - 7,000)= $1.5 per unit

Now, we can determine the fixed costs:

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

Fixed costs= 16,500 - (1.5*10,000)= $1,500

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

Fixed costs= 12,000 - (1.5*7,000)= $1,500

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