Problem
High-Low Method for a Service Company
Boston 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 Boston 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
|
$1,334,600
|
296,000
|
|
February
|
1,488,000
|
331,000
|
|
March
|
1,051,600
|
214,000
|
|
April
|
1,426,600
|
320,000
|
|
May
|
1,196,500
|
258,000
|
|
June
|
1,534,000
|
348,000
|
Determine the variable cost per gross-ton mile and the total fixed cost.