Respuesta :
Answer:
a. Variable cost element is $0.80 per call.
b. Fixed cost element is $800.
Explanation:
Note: The data in the question question are merged together. They are therefore sorted before answering the question as follows:
Calls Costs
2,000 $2,400
1,500 2,000
2,200 2,600
2,500 2,800
2,300 2,700
1,700 2,200
The explanation of the answers is now given as follows:
a. Calculation of variable cost elements
Variable cost per call = (Highest Costs - Lowest Costs) / (Highest Calls - Lowest Calls) = ($2,800 - $2,000) / (2,500 - 1,500) = $800 / 1,000 = $0.80
Therefore, variable cost element is $0.80 per call.
b. Calculation of fixed cost elements
Total cost = Total Fixed Cost + Total Variable Cost ................. (1)
Where;
Total Variable Cost = Variable cost call * Calls at a particular Total Cost
Using highest calls and substitute into equation (1), we have:
$2,800 = Total Fixed Cost + ($0.80 * 2,500)
$2,800 = Total Fixed Cost + $2,000
Total Fixed Cost = $2,800 - $2,000
Total Fixed Cost = $800
Therefore, fixed cost element is $800.
