Darwin’s HighFlyer Hotel has spare laundry capacity and is considering offering a laundry service to the Luigi Brothers, who own three Italian restaurants. To aid deliberations concerned with what rate should be quoted when offering the service, the Laundry Manager has asked for your assistance in analysing the laundry department’s fixed and variable costs.

From her departmental records, the Laundry Manager has extracted the following schedule of cost information.

Required:

a) Use the high-low method to determine the laundry department’s fixed and variable cost structures.

b) Provide an estimate of the total cost if 25,000 kilograms of laundry were processed in a month.

Transcribed Image Text:

Month Laundry costs $ Kilograms of laundry processed July 22,000 20,000 August 21,600 19,500 September 21,800 19,750 October 20,800 18,500 November 20,720 18,400 December 20,400 18,000