Blue Spruce Company accumulates the following data concerning a mixed cost, usin

Question

Blue Spruce Company accumulates the following data concerning a mixed cost, using miles as the activity level Miles Total Driven Cost Miles Total Driven Cost January 8,000 $27,200 March 8,700 $29,470 February 7,500 25,750 April 8,2 27,860 Compute the variable cost per mile using the high-low method. (Round variable cost per mile to 2 decimal places e.g. Variable cost per mile ? LINK TO TEXT INTERACTIVE TUTORIAL Compute the fixed cost elements using the high-low method. Fixed costs s Click if you would like to Show Work for this question: Open Show Work INK TO TEXT INTERACTIVE TUTORIAL

Explanation / Answer

1.Variable cost per unit=[Total cost at highest level-Total cost at lowest level]/(Highest level-Lowest level)

=(29470-25750)/(8700-7500)=$3.10 per mile

Fixed cost=29470-(3.1*8700)=$2500.

2.

Total sales=Breakeven sales+Margin of safety

Margin of safety=(750000-600,000)=$150,000

Margin of safety ratio=Margin of safety/Total sales

=(150000/750000)=20%

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