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632 100 $43 333 October 842 500 57 770 November 1 087 900 62 800 December 1 132 100 68 333 Administrative cost is a
632 100 $43 333 October 842 500 57 770 November 1 087 900 62 800 December 1 132 100 68 333 Administrative cost is a mixed cost, and sales is a potential cost driver. Required Using the high-low method, create a cost function for administrative costs. Total revenue (TR) instead of quantity (Q) in the cost function because sales is a potential cost driver. Under the high-low method, the cost function is calculated using the highest and lowest values of the cost driver. First, the variable cost is calculated: ($68 333 - $43 333)($1 132 100-$632 100) = $25 000/$500 000 = 0.05 or 5% of sales The fixed cost is determined by substituting the variable cost into one of the high-low data points: $68 333 = F + 5%*$1 132 100 F= $68 333 - $56 605 = $11 728 Thus, the total cost function is: TC =$11 728 + 5%*Sales 2. Wentworth Ltd sold 100 000 1 litre bottles of mineral water last year at $4 per unit and made a profit of $50 000. This year the costs for Wentworth Ltd remained the same, it sold 120 000 units at the same price, and made a profit of $80 000. Required
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