Swanson and Associates presently leases a copy machine under an agreement that calls for a fixed fee each month and a charge for each copy made. Swanson made 7,000 copies and paid a total of $360 in March; in May, the firm paid $280 for 5,000 copies. The company uses the high-low method to analyze costs.
Swanson's monthly fixed fee is:
A) $80.
B) $102.
C) $106.
D) $112.
E) None of the other answers is correct.

Question

Quizplus · Accepted Answer

The high-low method calculates the variable cost per unit first: ($360 - $280) / (7,000 - 5,000) = $0.04 per copy. Then, using either the high or low point, calculate the fixed fee: $360 - ($0.04 * 7,000) = $80.

Swanson and Associates Presently Leases a Copy Machine Under an Agreement