Question

high-low method for a service company

sierra railroad inc. decided to use the high-low method and operating data from the past six months to estimate the fixed and variable components of transportation costs. the activity base used by sierra railroad is \gross-ton miles,\ which is the total number of tons multiplied by the miles moved.

\

$$\begin{tabular}{lcc} & transportation costs & gross-ton miles \\\\ \\hline january & \\$2,900,000 & 3,000,000 \\\\ february & 2,875,000 & 2,500,000 \\\\ march & 3,065,000 & 6,300,000 \\\\ april & 3,225,000 & 9,500,000 \\\\ may & 3,387,500 & 12,750,000 \\\\ june & 3,250,000 & 10,000,000 \\end{tabular}$$

determine the variable cost per gross-ton mile and the total fixed cost.
variable cost (if required, round to two decimal places.) \\$
per gross-ton mile
total fixed cost \\$

Explanation:

Identify high and low activity levels

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Calculate variable cost per gross-ton mile

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Calculate total fixed cost

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$$

Answer:

Determine the variable cost per gross-ton mile and the total fixed cost.
Variable cost (If required, round to two decimal places.) $<blank>0.05</blank> per gross-ton mile
Total fixed cost $<blank>2,750,000</blank>