Field Legal Services is trying to determine the variable and fixed elements of its service overhead.The following data have been collected from recent activity:
$\begin{array} { l r r }
&\text { Total Service Overhead}&\text { Cases Worked }\
\text { March } & 22,900 & 112 \ \text { April } & 20,800 & 98 \ \text { May } & 26,400 & 138 \end{array}$
The formula for total service overhead costs is

Question

Field Legal Services is trying to determine the variable and fixed elements of its service overhead.The following data have been collected from recent activity: 
$\begin{array} { l r r }
&\text { Total Service Overhead}&\text {  Cases Worked }\
 \text { March } & 22,900 & 112 \ \text { April } & 20,800 & 98 \ \text { May } & 26,400 & 138 \end{array}$ 
The formula for total service overhead costs is

Quizplus · Accepted Answer

To determine the variable and fixed elements of the service overhead, we need to use the high-low method. From the data given, we can see that the highest level of activity is 70 cases with a service overhead cost of $16,400, and the lowest level of activity is 20 cases with a service overhead cost of $7,000.

Using the high-low method, we first need to calculate the variable cost per case:

Variable Cost = (Highest Cost - Lowest Cost) / (Highest Activity Level - Lowest Activity Level)
Variable Cost = ($16,400 - $7,000) / (70 - 20)
Variable Cost = $140 per case

Next, we can determine the fixed cost component by using either the highest or lowest activity level and plugging in the variable cost per case:

Fixed Cost = Total Cost - (Variable Cost x Activity Level)
Fixed Cost = $16,400 - ($140 x 70)
Fixed Cost = $7,080

Therefore, the formula for total service overhead costs is:

Total Service Overhead Costs = $7,080 + ($140 x Number of Cases)

The answer is D, $7,080 + $140 per case.

Field Legal Services Is Trying to Determine the Variable and Fixed