Cardinal Cleaners
Cardinal Cleaners documented the gallons of cleaning solvent it used as well as total overhead costs for the past five months as follows:
$$\begin{array} { l c c }
& \text { Number of gallons } & \text { Total overhead costs } \
\hline \text { July } & 160 & \$ 6500 \
\text { August } & 150 & 6100 \
\text { September } & 155 & 6700 \
\text { October } & 175 & 7000 \
\text { November } & 170 & 6800
\end{array}$$
-Cardinal uses the high/low method to predict total overhead costs.If Cardinal anticipates using 200 gallons of solvent in December,what are expected total overhead costs?

Question

Cardinal Cleaners
Cardinal Cleaners documented the gallons of cleaning solvent it used as well as total overhead costs for the past five months as follows:
$$\begin{array} { l c c } 
& \text { Number of gallons } & \text { Total overhead costs } \
\hline \text { July } & 160 & \$ 6500 \
\text { August } & 150 & 6100 \
\text { September } & 155 & 6700 \
\text { October } & 175 & 7000 \
\text { November } & 170 & 6800
\end{array}$$
-Cardinal uses the high/low method to predict total overhead costs.If Cardinal anticipates using 200 gallons of solvent in December,what are expected total overhead costs?

Quizplus · Accepted Answer

First, identify the high and low activity levels. The highest is October with 175 gallons and costs of $7000, and the lowest is August with 150 gallons and costs of $6100. The variable cost per gallon is calculated as $(7000 - 6100) / (175 - 150) = 900 / 25 = 36$. The fixed cost is found by subtracting the total variable cost at either level from the total cost, e.g., $7000 - (175 \times 36) = 7000 - 6300 = 700$. The total cost for 200 gallons is then $200 \times 36 + 700 = 7200 + 700 = 7900$.

Cardinal Cleaners Cardinal Cleaners Documented the Gallons of Cleaning Solvent

Cardinal Cleaners
Cardinal Cleaners Documented the Gallons of Cleaning Solvent