Cost Behavior, High$-$Low Method, Pricing Decision

Fonseca, Ruiz, and Dunn is a large, local accounting firm located in a southwestern city. Carlos Ruiz, one of the firm's founders, appreciates the success his firm has enjoyed and wants to give something back to his community. He believes that an inexpensive accounting services clinic could provide basic accounting services for small businesses located in the barrio. He wants to price the services at cost$.$

Since the clinic is brand new, it has no experience to go on$.$ Carlos decided to operate the clinic for $2$ months before determining how much to charge per hour on an ongoing basis. As a temporary measure, the clinic adopted an hourly charge of $$25,$ half the amount charged by Fonseca, Ruiz, and Dunn for professional services.

The accounting services clinic opened on January $1.$ During January, the clinic had $120$ hours of professional service. During February, the activity was $150$ hours. Costs for these two levels of activity usage are as follows:

Line Item Description $120$ Professional

Hours $150$ Professional

Hours

Salaries:

Senior accountant $$2,500$ $$2,500$

Office assistant $1,2001,200$

Internet and software subscriptions $700850$

Consulting by senior partner $1,2001,500$

Depreciation $($equipment$)2,4002,400$

Supplies $9051,100$

Administration $500500$

Rent $($offices$)2,0002,000$

Utilities $332365$