Determining mixed costs—the high-low methodThe manager of Trusty Car inspection reviewed the monthly operating costs for the past year. The costs ranged from $4,300 for 1,300 inspections to $3,900 for 900 inspections.RequirementsUse the high—low method to calculate the variable cost per inspection.Calculate the total fixed costs.Write the equation and calculate the operating costs for 1,000 inspections.Draw a graph illustrating the total cost under this plan. Label the axes, and show the costs at 900, 1,000, and 1,300 inspections.

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FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Determining mixed costs—the high-low method

The manager of Trusty Car inspection reviewed the monthly operating costs for the past year. The costs ranged from $4,300 for 1,300 inspections to $3,900 for 900 inspections.

Requirements

Use the high—low method to calculate the variable cost per inspection.
Calculate the total fixed costs.
Write the equation and calculate the operating costs for 1,000 inspections.
Draw a graph illustrating the total cost under this plan. Label the axes, and show the costs at 900, 1,000, and 1,300 inspections.

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