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High-Low Method for a Service Company Boston Railroad decided to use the high-low method and operating data from the past six months to estimate the
High-Low Method for a Service Company Boston Railroad decided to use the high-low method and operating data from the past six months to estimate the fixed and variable components of transportation costs. The activity base used by Boston Railroad is a measure of railroad operating activity, termed "gross-ton miles," which is the total number of tons multiplied by the miles moved. Gross-Ton Miles Transportation Costs $1,018,900 January 281,000 February 1,136,100 314,000 March 802,900 203,000 1,089,200 304,000 April May 913,500 244,000 June 1,171,200 330,000 Determine the variable cost per gross-ton mile and the fixed cost. Variable cost (Round to two decimal places.) $ 1.18 x per gross-ton mile Total fixed cost $ 780,976 x Feedback Check My Work Divide the difference between the highest and lowest transportation costs by the difference between the highest and lowest gross-ton miles. Multiply the variable unit cost by the number of gross-ton miles for a month. Subtract this variable cost from the month's transportation cost to arrive at the fixed cost. The resulting amount should be the same for either the highest or lowest production month
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