Bramble Gravity Grips produces spike sets for track shoes. CEO Brittany Bramble

Question

Bramble Gravity Grips produces spike sets for track shoes. CEO Brittany Bramble has gathered the following information about the company’s sales volume and marketing cost for the past six months: Sales Volume Total Marketing Costs January 550,836 $82,736 February 390,836 $74,527 March 561,496 $83,060 April 543,000 $82,320 May 546,928 $82,520 June 552,808 $82,888

Compute the total fixed marketing cost. (For computation puposes round variable cost to 2 decimal places, e.g. 52.75 and final answer to 0 decmial places, e.g. 5,275.)

Explanation / Answer

Using the high-low method:

Variable cost per unit = $8533/170660 = $0.05

Fixed cost (at high level) = $83060 - (561496 x $0.05) = $83060 - $28074.8 = $54985

Fixed cost (at low level) = $74527 - (390836 x $0.05) = $74527 - $19541.8 = $54985

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