Using High- Low Method

3-26: Speedy petes is a small start up company that delivers high end coffee drinks to large metropolitan office buildings via a cutting-edge motorized coffee cart to compete with other premium coffee shops. Data for the top 8 months were collected as follows.

month delivery cost number of delivers

May 63,450 1,800

June 67,120 2,010

July 66,990 2,175

August 68,020 2,200

September 73,400 2,550

October 72,850 2,630

November 75,450 2,800

December 73,300 2,725

(1) Which month represents the high point?

(2) Which month represents the low point?

(3) Using the high-low method, compute the variable rate.

(4) Using the high-low method, compute the fixed cost per month.

(5) Using your answers thus far, write the cost formula for delivery cost.

(6) Assume that 2,480 deliveries are budgeted for next month--using the high-low method formula you developed, forecast the amount of delivery cost for next month.