The Bradshaw Law Office has the following monthly telephone records and costs: Calls Costs 2,000 $2,400 1,500 2,000 2,200 2,600 2,500 2,800 2,300 2,700 1,700 2,200 Identify the fixed and variable cost elements using the high-low method.

a. Variable cost element is $0.80 per call.

b. Fixed cost element is $800.

Explanation:

Note: The data in the question question are merged together. They are therefore sorted before answering the question as follows:

Calls Costs

2,000 $2,400

1,500 2,000

2,200 2,600

2,500 2,800

2,300 2,700

1,700 2,200

The explanation of the answers is now given as follows:

a. Calculation of variable cost elements

Variable cost per call = (Highest Costs - Lowest Costs) / (Highest Calls - Lowest Calls) = ($2,800 - $2,000) / (2,500 - 1,500) = $800 / 1,000 = $0.80

Therefore, variable cost element is $0.80 per call.

b. Calculation of fixed cost elements

Total cost = Total Fixed Cost + Total Variable Cost (1)

Where;

Total Variable Cost = Variable cost call * Calls at a particular Total Cost

Using highest calls and substitute into equation (1), we have:

$2,800 = Total Fixed Cost + ($0.80 * 2,500)

$2,800 = Total Fixed Cost + $2,000

Total Fixed Cost = $2,800 - $2,000

Total Fixed Cost = $800

Therefore, fixed cost element is $800.

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