Blowing Rock Railroad decided to use the high-low method and operating data from
ID: 2466842 • Letter: B
Question
Blowing Rock Railroad 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 Blowing Rock Railroad is a measure of railroad operating activity, termed gross miles," which is the total number of tons multiplied by the milles moved. Determine the variable cost per gross-ton mile and the fixed cost. variable cost (Round to two decimal places.) $ Per gross-ton mile Total fixed cost $Explanation / Answer
y = a + bx
a = Fixed cost
b = variable cost per unit
b = y2 y1 / x2 x1
Y2 = $882,100
Y1 = $604,700
X2 = 380,00
X1= 234,000
Therefore b = ($882,100 - $604,700) / (380,000 - 234,000) = 1.9
$882,100 = a+ (1.9 * 380,000)
a = $882,100 - $722,000 = 160,100
Variable cost = $1.9 per gross - tone mile
Total fixed cost = $160,100