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Accounting-Cost Concept Problem.

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See attached file for full problem description.

1. Using the high/ low two-point method, determine the variable cost per customer.
2. What is the monthly fixed labor cost at Jim's Place?
3. What is your estimate of total labor costs if 3900 customers are served during the month?

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Solution Summary

The solution uses the high and low two-point method to determine the variable cost per customer. The monthly fixed labor cost is found.

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HIGH-LOW METHOD:
This is a method for separating costs into fixed and variable components, based upon the difference between costs at the highest and lowest observed levels of activity
With the high-low technique, the highest and lowest levels of activity are identified for a period of time. Say the highest repair paid is $2000, and the lowest is $1500. The difference in cost between the highest and lowest level of activity represents the variable cost ($2000 - $1500 = $500) associated with the change in activity (1500 tshirts on the high end and 1,000 tshirts on the ...

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