High-Low Method, Cost Formulas
During the past year, the high and low use of three differentresources for Fly High Airlines occurred in July and April. Theresources are airplane depreciation, fuel, and airplanemaintenance. The number of airplane flight hours is the driver. Thetotal costs of the three resources and the related number ofairplane 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 | | | 16,768,000 | |
| Low | 28,000 | | | 11,736,000 | |
Required:
Use the high-low method to answer the following questions. If ananswer is zero, enter "0". If required, round your answers tonearest dollar.
1. What is the variable rate for airplanedepreciation?
$per flight hour
What is the fixed cost for airplane depreciation?
$
2. What is the cost formula for airplanedepreciation?
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 airplanemaintenance?
$ per flight hour
What is the fixed cost for airplane maintenance?
$
6. What is the cost formula for airplanemaintenance?
Total cost of airplane maintenance = $
+ ( $ × )
7. Using the three cost formulas that youdeveloped, predict the cost of each resource in a month with 36,000airplane flight hours. (Note: Do not round intermediatecalculations.)
| Total cost of airplane depreciation | $ |
| Total cost of fuel | $ |
| Total cost of airplane maintenance | $ |
