7.

Supply costs at ABC Corporation's chain of gyms are listed below:

Management believes that supply cost is a mixed cost that depends on client-visits. Using the high-low
method to estimate the variable and fixed components of this cost, those estimates would be closest
to: 
A. $2.44 per client-visit; $28,623 per month
B. $1.33 per client-visit; $12,768 per month
C. $0.79 per client-visit; $19,321 per month
D. $0.75 per client-visit; $19,826 per month

Discussion:

Client Visit Supply Cost

High: June 12,088 visits $28,892
Low: August 11,193 visits $28,221
Difference 895 visits $671
Variable cost per client visit = 671/895 = $.75per client visit
Fixed Cost for supplies per month = 28,892-12,088 *.75 = 19826

8. Buckeye Company has provided the following data for maintenance cost:
2014 2015
Machine hours 12,500 15,000
Maintenance cost $27,000 $31,000
The best estimate of the cost formula for maintenance would be: 
A. $21,625 per year plus $0.625 per machine hour
B. $7,000 per year plus $0.625 per machine hour
C. $7,000 per year plus $1.60 per machine hour
D. $27,000 per year plus $1.60 per machine hour

Discussion: Difference in Machine hours = 2,500; Difference in Maintenance: $4,000;

Maintenance cost per machine hour = $4,000 / 2,500 = 1.60 per machine hour; Fixed Cost of
maintenance = 27000 – 1.60*12,500=7,000

Use the following information for questions 9 and 10.

Chaffee Corporation staffs a helpline to answer questions from customers. The costs of operating the
helpline are variable with respect to the number of calls in a month. At a volume of 33,000 calls in a
month, the costs of operating the helpline total $742,500.