Sierra Railroad Inc. 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 Sierra Railroad is “gross-ton miles,” which is the total number of tons multiplied by the miles moved.

Determine the variable cost per gross-ton mile and the total fixed cost.

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January February March April May June Transportation Costs $2,900,000 2,875,000 3,065,000 3,225,000 3,387,500 3,250,000 Gross-Ton Miles 3,000,000 2,500,000 6,300,000 9,500,000 12,750,000 10,000,000