FINANCIAL ACCOUNTING
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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 hourWhat 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 hourWhat 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 hourWhat 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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