Darwin’s HighFlyer Hotel has spare laundry capacity and is considering offering a laundry service to the Luigi Brothers who own three Italian restaurants. To aid deliberations concerned with what rate should be quoted when offering the service, the Laundry Manager has asked for your assistance in analysing the Laundry department’s fixed and variable costs. From her departmental records, the laundry manager has extracted the following schedule of cost information.

Required

(a) Use the high–low method to determine the laundry department’s fixed and variable cost structures. (b) Provide an estimate of the total cost if 25,000 kilograms of laundry were processed in a month
 

Kilograms of laundry processed Month Laundry costs $ July August September October 22,000 21,600 21,800 20,000 19,500 19,750 18,500 18,400 18,000 November December 20,800 20,720 20,400