Using the high-low method and the information below, compute the monthly total fixed costs for SKP Corporation. $\begin{array}{lcc}
\text { Month } & \text { Telephone Hours Used } & \text { Telephone Expenses } \
\text { April } & 100 & \$ 4,500 \
\text { May } & 110 & 4,800 \
\text { June } & 150 & 5,400
\end{array}$

Question

Quizplus · Accepted Answer

To calculate the monthly total fixed costs using the high-low method, first, identify the months with the highest and lowest levels of activity. In this case, June has the highest telephone hours used (150) and April has the lowest (100). The difference in telephone hours between these months is 50 (150 - 100). The difference in telephone expenses between these months is $900 ($5,400 - $4,500). The variable cost per telephone hour is calculated as the difference in costs divided by the difference in hours, which is $900 / 50 = $18 per hour. To find the fixed costs, we use the total cost equation: Total Cost = Fixed Costs + (Variable Cost per Unit * Number of Units). Rearranging to solve for fixed costs gives us: Fixed Costs = Total Cost - (Variable Cost per Unit * Number of Units). Using the data from either the high or low point, for April (low point), the calculation is: Fixed Costs = $4,500 - ($18 * 100) = $4,500 - $1,800 = $2,700.

Using the High-Low Method and the Information Below, Compute the Monthly