Assume that the cafeteria expects to serve 1,850 meals during Week 8. Using the high-low method, the expected total cost of the cafeteria would be:
A)$5,340
B)$5,180
C)$5,300
D)$4,375

Question

Quizplus · Accepted Answer

To use the high-low method, we need two data points - the highest and lowest levels of activity and their corresponding costs. Let's assume the data for the cafeteria is as follows:

Highest level of activity: 2,000 meals, cost $6,000
Lowest level of activity: 1,500 meals, cost $4,500

Using this data, we can find the variable cost per meal by using the formula:

Variable cost per meal = (highest cost - lowest cost) / (highest level of activity - lowest level of activity)
= ($6,000 - $4,500) / (2,000 - 1,500)
= $1.50

Now, we can use the variable cost per meal to find the total cost at the expected level of activity, which is 1,850 meals:

Total cost = Fixed cost + Variable cost per meal x Expected level of activity
= $2,000 + $1.50 x 1,850
= $2,000 + $2,775
= $5,300

Therefore, the expected total cost of the cafeteria would be $5,300. The best choice is option C.

Assume That the Cafeteria Expects to Serve 1,850 Meals During