Problem 1 (8 Marks)
Don Mills corp has an annual summer BBQ for its employees. A local caterer provides lunch and
a tent. The Don Mills pays a flat fee for the tent and an additional amount for each employee in
attendance. However, in the past Don Mills Corp have never been able to determine how much
the caterer is going to charge. In an effort to determine how much the caterer will charge this
year, they have tracked the cost and attendance data over the past 8 years.
Attendance
Caterer
Cost
210
$6,000
175
$4,800
240
$6,400
250
$6,600
300
$7,000
340
$7,200
400
$7,500
180
$4,700
Instructions
a. Use the high-low method to calculate the food cost per person (variable cost).(5Marks)
7,500 - 4,700
400 - 140
= \frac{2800}{220} = 12.73\$
Variable Cost
VC = 12.73 \times 400
= $5092
b. How much is the charge for the tent (fixed cost) ?(3marks)
FC = 7500 - (12.73 \times 400)
= 7500 - 5092
= $2408