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Problem - Continental 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 Continental 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
$24,500,000
3,000,000
February
22,375,000
2,500,000
March
29,000,000
6,300,000
April
34,800,000
9,500,000
May
40,312,500
12,750,000
June
35,500,000
10,000,000
Required - Determine the variable cost per gross-ton mile and the total fixed cost.
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