The phone bill for a CPA firm is a mixed cost. Please refer to the 4-month data below, apply the high-low method, and answer the question. If the company uses 280 minutes in May, how much will the total bill be?

Question

The phone bill for a CPA firm is a mixed cost. Please refer to the 4-month data below, apply the high-low method, and answer the question.  If the company uses 280 minutes in May, how much will the total bill be?

Quizplus · Accepted Answer

Using the high-low method:
High point: March, 500 minutes, $3150
Low point: January, 150 minutes, $2100

Variable cost = (high cost - low cost) / (high activity - low activity)
Variable cost = ($3150 - $2100) / (500 - 150)
Variable cost = $10

Fixed cost = total cost - (variable cost x total activity)
Fixed cost = $3150 - ($10 x 500)
Fixed cost = $2650

Total cost using this formula: 
Total cost = fixed cost + (variable cost x activity level)

Total cost of 280 minutes in May: 
Total cost = $2,650 + ($10 x 280) 
Total cost = $2,650 + $2,800 
Total cost = $5,450

Rounded to the nearest dollar, the bill will be $2,640.

The Phone Bill for a CPA Firm Is a Mixed