Wally World provided the following data concerning its costs of operating and the number of riders of its Scream ride and the related linear regression for selected operation months: Using the high-low method, what is the amount of total fixed costs for the Scream ride?
A) $1,560
B) $1,575
C) $2,086
D) $2,770

Question

Wally World provided the following data concerning its costs of operating and the number of riders of its Scream ride and the related linear regression for selected operation months:  Using the high-low method, what is the amount of total fixed costs for the Scream ride?
A) $1,560 
B) $1,575 
C) $2,086 
D) $2,770

Quizplus · Accepted Answer

Using January as the high activity point, and April as the low activity point, we can compute the unit variable cost as (High cost - Low cost) / (High activity - Low activity) = ($11,320 - $9,745) / (3,800 - 3,100) = $1,575 / 700 = $2.25. Total fixed costs (at high) = $11,320 - (3,800 x $2.25) = $2,770.

Wally World Provided the Following Data Concerning Its Costs of Operating