1.High-Low Points Method

BEYONDBIKES.COM considers electricity a mixed cost.By using a scatter chart, George has determined that there is a relationship between electricity expense and the number of hours per month the store is open. During the past year, electricity expense totaled $7200 in the month that the store was open 1200 hours and $4200 in the month that it was open 300 hours.What fixed monthly cost and hourly rate should George use to estimate electricity expense for the upcoming year?

2.High/Low Method

BEYONDBIKES.COM frequently hires temporary secretarial help and also pays overtime wages to its full-time secretaries.Management believes that the need for additional secretarial help is based on either total sales or the number of employee hours worked. I have already determined this by preparing a Scatter Graph and it is TOTAL SALES! Data from last year's records are shown below:

MonthTotalTotal Total

SecretarialSalesNumber

Expenseof Employee

Hours

January$13,000$90,00020,000

February$14,000$100,00010,000

March$14,000$110,00025,000

April$16,000$160,00030,000

May$12,000$80,00014,000

June$17,000$180,00028,000

July$20,000$240,00030,000

August$15,000$150,00020,000

September $22,000$300,00030,000

October$19,000$200,00015,000

November$20,000$250,00018,000

December$15,000$130,00012,000

QUESTION:

Using the appropriate cost driver (TOTAL SALES) use the high-low points method to calculate the variable rate and the fixed cost per month.

HINT: You do not need Employee Hours to solve this!