Question 2 (30 marks)

A- AAA Company accumulates the following data concerning a mixed cost, using miles as the activity level.

Miles Driven Total Cost

January 10,000 $15,625

February 8,000 13,500

March 9,000 14,400

April 7,500 12,500

Required:

1. Compute the variable and fixed cost elements using the high-low method
2. If it is estimated that 15,000 miles will be driven in May, what is the expected total cost for May?
3. Explain the various methods used to estimate the variable component and the fixed component of the mixed cost and state which method is the most accurate? Why?

(12.5 Marks)