Zurbrigg Copy Solutions presently leases a copy machine under an agreement that calls for a fixed fee each month and a charge for each copy made. Zurbrigg made 9,000 copies and paid a total of $560 in July; in November, the firm paid $480 for 7,000 copies. The company uses the high-low method to analyze costs. Zurbrigg's monthly fixed fee is:
A)$200.
B)$461.
C)$480.
D)$515.
E)$560

Question

Quizplus · Accepted Answer

The high-low method calculates the variable cost per unit first, then uses it to find the fixed cost. The variable cost per copy is ($560 - $480) / (9,000 - 7,000) = $0.04. Using July's data: $560 = Fixed Fee + ($0.04 * 9,000), the fixed fee is $200.

Zurbrigg Copy Solutions Presently Leases a Copy Machine Under an Agreement