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    High Low method, Sensitivity analysis, operating leverage, break even

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    Bonkers, Inc. makes highly processed and sugary cereals for people that don't care
    about their health. One of their costs is shipping of their products. In the year 2010
    Bonkers incurred the following shipping costs:


    January 1,000 $225,000
    February 1250 $235,000
    March 1750 275,000
    April 2250 320000
    May 3000 330000
    June 3500 345000
    July 3450 350000
    August 3300 343000
    September 2750 315000
    October 2000 255,000
    November 1500 245,000
    December 1250 240,000

    Bonkers would like to know if you can come up with a cost formula to show its
    management how much of its cost is fixed and how much is variable, or if it WORK SPACE
    is even possible to do this. Using the high-low method, determine the
    fixed cost and variable cost per ton to ship Bonkers cereas. Then
    enter a cost formula in the form Y =a+bx Leave no spaces between the variables.
    Looking at the other months and costs of shipping, do you think that the
    high-low cost formula you calculated in 1 above is accurate?

    1) VARIABLE 1
    FIXED 2

    word bank
    2) 4 no

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    Solution Preview

    Please see the attachment. Please see the cell formula for calculation details.

    High Low Method - We take the highest and the lowest values. Highest is June 3,500 and lowest in Jan 1,000
    The variable cost is calculated as (change in cost)/(change in units)
    Fixed cost = Total cost - Total variable cost
    Cost function = Fixed cost + variable cost ...

    Solution Summary

    The expert examines high low method, sensitivity analysis and operating leverages.