Continental 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 Continental 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 $24,500,000 3,000,000 February 22,375,000 2,500,000 March 29,000,000 6,300,000 April 34,800,000 9,500,000 May 40,312,500 12,750,000 June 35,500,000 10,000,000 Determine the variable cost per gross-ton mile and the total fixed cost.
Continental 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 Continental 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 $24,500,000 3,000,000 February 22,375,000 2,500,000 March 29,000,000 6,300,000 April 34,800,000 9,500,000 May 40,312,500 12,750,000 June 35,500,000 10,000,000 Determine the variable cost per gross-ton mile and the total fixed cost.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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High-Low Method for a Service Company
Continental 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 Continental 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 | $24,500,000 | 3,000,000 | ||
| February | 22,375,000 | 2,500,000 | ||
| March | 29,000,000 | 6,300,000 | ||
| April | 34,800,000 | 9,500,000 | ||
| May | 40,312,500 | 12,750,000 | ||
| June | 35,500,000 | 10,000,000 |
Determine the variable cost per gross-ton mile and the total fixed cost.
| Variable cost (If required, round to two decimal places.) | $fill in the blank 1 per gross-ton mile |
| Total fixed cost | $fill in the blank 2 |
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