CHAPTER 3 High Low Method Forecasting a Mixed Cost
In Class Practice				Speedy Pete's Coffee Delivery
HIGH-LOW METHOD
Delivery	Cost				# of Deliveries
May	$ 63,450				1800
June	$ 67,120				2010
July	$ 66,990				2175
August	$ 68,020				2200
September	$ 73,400				2550
October	$ 72,850				2630
November	$ 75,450				2800
December	$ 73,300				2725
FYI: Total Cost=Total Fixed Cost +(Variable Rate * Activity)
Step 1. Find the High Low Activity for the data set
Step 2. Estimate the Variable Rate per unit using the High Low data
VARIABLE RATE	=	High Activity Cost-Low Activity Cost
		High Activity-Low Activity
	=		=
Step 3. Estimate the fixed cost component:
Fixed Cost= Total Cost at High Point - (Variable Rate X Activity at High Point)
Step 3: Form the cost formula for delivery cost
Total Cost = Fixed Cost from Step 3 + (Variable Rate from step 2 * Number of Deliveries)
Step 5. Estimate the total delivery cost for January based on 3000 deliveries
Use your Formula created in step 4 to solve. Show your work.