Mountain Dental Services is a specialized dental practice whose only service is

Question

Mountain Dental Services is a specialized dental practice whose only service is filling cavities. Mountain has recorded the following for the past nine months:

Required:
1. Use the high-low method to estimate total fixed cost and variable cost per cavity filled. (Round your answers to 2 decimal places.)

2. Using these estimates, calculate Mountain’s total cost for filling 800 cavities.

Month Number of Cavities Filled Total Cost January 400 $5,350 February 325 5,050 March 675 6,600 April 700 6,300 May 425 5,450 June 500 5,850 July 550 6,150 August 300 5,200 September 450 5,500

Explanation / Answer

1. Use the high-low method to estimate total fixed cost and variable cost per cavity filled.

Variable Cost per unit = Change in Total cost from april and august / Change in Quantity

...................................= ($6,300 - $5,200) / (700 - 300)

...................................= $1,100 / 400

...................................= $2.75 per unit

Fixed cost = $6,300 - ($2.75 x 700)

..................= $4,375

2. Using these estimates, calculate Mountain’s total cost for filling 800 cavities.

Estimated Total Cost = (Variable Cost per unit x Variable cost per filling) + Fixed Cost

..................................= ($2.75 x 800) + $4,375

..................................= $6,575

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