High-Low Method, Cost Formulas During the past year, the high and low use of thr

Question

High-Low Method, Cost Formulas During the past year, the high and low use of three different resources for Fly High Airlines occurred in July and April. The resources are airplane depreciation, fuel, and airplane maintenance. The number of airplane flight hours is the driver. The total costs of the three resources and the related number of airplane flight hours are as follows: Airplane Flight Resource Hours Total Cost Airplane depreciation High 44,000 18,200,000 Low 28,000 $ 18,200,000 Fuel High 44,000 445,896,000 Low 28,000 283,752,000 Airplane maintenance High 44,000 16,048,000 28,000 12,448,000 Required: Use the high-low method to answer the following questions. If an answer is zero, énter "O". If required, round your answers to nearest dollar 743 PM /20/20182

Explanation / Answer

1) Variable rate for airplane depreciation = (1820000-1820000)/(44000-28000) = $0

Fixed cost = Total cost-variable cost

= 1820000-0

Fixed cost = $1820000

2) Cost formula : Airplane depreciation

Total cost = $1820000

3) Variable rate for fuel =(445896000-283752000)/(44000-28000) = 10134 per flight hours

Fixed cost = 445896000-(44000*10134) = $0

4) Total Cost = $0+$10134X

5) Variable rate for airplane maintenance = (16048000-12448000)/(44000-28000) = 225 per flight hours

Fixed cost = 16048000-(44000*225) = 6148000

6)Cost formula

Total cost = $6148000+$225X

7) Calculate cost

Airplane depreciation = $18200000

Fuel = 36000*10134 = $364824000

Airplance maintenance = (36000*225+6148000) = $14248000

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