Health Source Hospital (HSH) has a standing contract with an air charter service to deliver critical medications throughout its service network. The contract calls for a fixed monthly payment plus a set of variable charges based on each flight's specific characteristics. The first table below includes information about total monthly cost and the number of flights. Below the table is a computational aid for estimating the fixed and variable cost components via the high-low method. Use the pick lists associated with each boxed area to select the high and low volumes. The remainder of the tables will automatically complete based on your selections. After correctly making each selection, the variable and fixed cost amounts will turn green. Carefully review the underlying logic of the calculations. January February March April May June July August September October November December Highest level Lowest level Difference Total cost Less: Variable cost (variable cost per flight X flights) Flights Fixed cost 7 14 11 18 21 16 8 12 6 18 15 9 Flights 21 Variable cost per flight (cost difference divided by flight difference) >>>> 6 15 HIGH 55,200 46,200 9,000 Cost 23,180 43,780 29,880 48,600 55,200 46,410 26,600 36,108 22,200 47,628 37,800 28,800 Cost 55,200 22,200 33,000 2,200 LOW 22,200 13,200 9,000
Health Source Hospital (HSH) has a standing contract with an air charter service to deliver critical medications throughout its service network. The contract calls for a fixed monthly payment plus a set of variable charges based on each flight's specific characteristics. The first table below includes information about total monthly cost and the number of flights. Below the table is a computational aid for estimating the fixed and variable cost components via the high-low method. Use the pick lists associated with each boxed area to select the high and low volumes. The remainder of the tables will automatically complete based on your selections. After correctly making each selection, the variable and fixed cost amounts will turn green. Carefully review the underlying logic of the calculations. January February March April May June July August September October November December Highest level Lowest level Difference Total cost Less: Variable cost (variable cost per flight X flights) Flights Fixed cost 7 14 11 18 21 16 8 12 6 18 15 9 Flights 21 Variable cost per flight (cost difference divided by flight difference) >>>> 6 15 HIGH 55,200 46,200 9,000 Cost 23,180 43,780 29,880 48,600 55,200 46,410 26,600 36,108 22,200 47,628 37,800 28,800 Cost 55,200 22,200 33,000 2,200 LOW 22,200 13,200 9,000
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter10: Standard Costing And Variance Analysis
Section: Chapter Questions
Problem 3MTC
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Transcribed Image Text:Health Source Hospital (HSH) has a standing contract with an air charter
service to deliver critical medications throughout its service network. The
contract calls for a fixed monthly payment plus a set of variable charges based
on each flight's specific characteristics. The first table below includes
information about total monthly cost and the number of flights.
Below the table is a computational aid for estimating the fixed and variable cost
components via the high-low method. Use the pick lists associated with each
boxed area to select the high and low volumes. The remainder of the tables will
automatically complete based on your selections. After correctly making each
selection, the variable and fixed cost amounts will turn green. Carefully review
the underlying logic of the calculations.
January
February
March
April
May
June
July
August
September
October
November
December
Highest level
Lowest level
Difference
Total cost
Less: Variable cost (variable cost per flight X
flights)
Flights
Fixed cost
7
14
11
18
21
16
8
12
6
18
15
9
Flights
21
Variable cost per flight (cost difference divided by flight difference) >>>>
6
15
HIGH
55,200
46,200
9,000
Cost
23,180
43,780
29,880
48,600
55,200
46,410
26,600
36,108
22,200
47,628
37,800
28,800
Cost
55,200
22,200
33,000
2,200
LOW
22,200
13,200
9,000
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