Use the high-low method to answer the following questions. If an answer is zero, enter "0". 1.  What is the variable rate for airplane depreciation? $per flight hour What is the fixed cost for airplane depreciation? $ 2.  What is the cost formula for airplane depreciation? Total cost of airplane depreciation = $ 3.  What is the variable rate for fuel? $ per flight hour What is the fixed cost for fuel? $ 4.  What is the cost formula for fuel? Total cost of fuel = $ x   5.  What is the variable rate for airplane maintenance? $ per flight hour What is the fixed cost for airplane maintenance? $ 6.  What is the cost formula for airplane maintenance? Total cost of airplane maintenance = $ + ( $ ×   ) 7.  Using the three cost formulas that you developed, predict the cost of each resource in a month with 36,000 airplane flight hours. Total cost of airplane depreciation $ Total cost of fuel $ Total cost of airplane maintenance $

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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  1. High-Low Method, Cost Formulas

    During the past year, the high and low use of three different resources for Fly High Airlines occurred in July and April. The resources are airplane depreciation, fuel, and airplane maintenance. The number of airplane flight hours is the driver. The total costs of the three resources and the related number of airplane flight hours are as follows:

    Resource Airplane Flight Hours Total Cost
    Airplane depreciation:    
    High 44,000          $ 18,000,000
    Low 28,000          18,000,000
    Fuel:    
    High 44,000          445,896,000
    Low 28,000          283,752,000
    Airplane maintenance:    
    High 44,000          15,792,000
    Low 28,000          11,504,000

    Required:

    Use the high-low method to answer the following questions. If an answer is zero, enter "0".

    1.  What is the variable rate for airplane depreciation?
    $per flight hour

    What is the fixed cost for airplane depreciation?
    $

    2.  What is the cost formula for airplane depreciation?

    Total cost of airplane depreciation = $

    3.  What is the variable rate for fuel?
    $ per flight hour

    What is the fixed cost for fuel?
    $

    4.  What is the cost formula for fuel?

    Total cost of fuel = $ x  

    5.  What is the variable rate for airplane maintenance?
    $ per flight hour

    What is the fixed cost for airplane maintenance?
    $

    6.  What is the cost formula for airplane maintenance?

    Total cost of airplane maintenance = $ + ( $ ×   )

    7.  Using the three cost formulas that you developed, predict the cost of each resource in a month with 36,000 airplane flight hours.

    Total cost of airplane depreciation $
    Total cost of fuel $
    Total cost of airplane maintenance $
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