What is the fixed cost of the autoclave equipment? (Roun $4 Fixed cost %24
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
The variable cost was 5.40
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
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 In January of this year, she had to replace the outdated autoclave equipment she inherited from the previous dentist.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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