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What is the fixed cost of the autoclave equipment? (Roun $4 Fixed cost %24

What is the fixed cost of the autoclave equipment? (Roun $4 Fixed cost %24

FINANCIAL ACCOUNTING
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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The variable cost was 5.40
What is the fixed cost of the autoclave equipment? (Round answer to 2 decimal places, e.g. 52.75.) $4 Fixed cost
Transcribed Image Text:What is the fixed cost of the autoclave equipment? (Round answer to 2 decimal places, e.g. 52.75.) $4 Fixed cost
After graduating from dental school two years ago, Dr. Elizabeth Brown purchased the dental practice of a long-time dentist who was retiring. In January of this year, she had to replace the outdated autoclave equipment she inherited from the previous dentist. Now, as she is preparing her budget for next year, she is concerned about understanding how her cost for sterilizing her dental instruments has changed. She has gathered the following information from her records: Month Number of instruments used Total autoclave cost 850 $6,115 January 750 5,550 February 920 6,551 March 950 6,980 April 7,710 1,150 May 6,498 900 June 7,645 1,050 July 6,921 975 August
Transcribed Image Text:After graduating from dental school two years ago, Dr. Elizabeth Brown purchased the dental practice of a long-time dentist who was retiring. In January of this year, she had to replace the outdated autoclave equipment she inherited from the previous dentist. Now, as she is preparing her budget for next year, she is concerned about understanding how her cost for sterilizing her dental instruments has changed. She has gathered the following information from her records: Month Number of instruments used Total autoclave cost 850 $6,115 January 750 5,550 February 920 6,551 March 950 6,980 April 7,710 1,150 May 6,498 900 June 7,645 1,050 July 6,921 975 August
Expert Solution
Step 1

Variable cost is $5.40, Then enter the variable cost in the highest activity or lowest activity.

Fixed cost = Total autoclave cost - (Number of instrument x variable cost)

 

Highest activity :-

Fixed cost = 7,710 - (1,150 x 5.40)

                 = 7,710 - 6,210

                 = 1,500

   OR

Lowest activity :-

Fixed cost = 5,550 - (750 x 5.40)

                 = 5,550 - 4,050

                 = 1,500

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