1. Johanna's Ice Cream Shoppe would like to better understand their payroll costs. Historical activity and payroll costs are as indicated below.

Using the high-low method, what is the fixed cost element? If July activity is estimated to be 3,500 units, what are estimated payroll costs for the month? Are there are any concerns with using the March-June data to estimate the July costs.

Month Activity (units sold) Payroll

March 1,200 $21,000

April 1,600 $23,000

May 2,200 $23,500

June 2,400 $25,000