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Problem - High-low method for service company - Diamond Railroad decided to use the high-low method and operating data from the past six months to estimate the fixed and variable components of transportation costs. The activity base used by Diamond Railroad is a measure of railroad operating activity, termed "gross-ton miles," which is the total number of tons multiplied by the miles moved.
Transportation Costs
Gross-Ton Miles
January
$1,190,000
385,000
February
1,043,000
434,000
March
900,000
350,000
April
1,015,000
420,000
May
920,000
360,000
June
1,250,000
525,000
Required - Determine the variable cost per gross-ton mile and the fixed cost.
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