Louis Petit, a manager of Doggone Gorgeous, Inc., was reviewing the water bills of a dog daycare and spa. He determined that its highest and lowest bills of $3800 and $2000 were incurred in the months of May and November, respectively. If 600 dogs were washed in May and 200 dogs were washed in November, what was the fixed cost associated with the company's water bill? (Round any intermediate calculations to the nearest cent and your final answer to the nearest dollar.)

$1,100

Explanation:

Given that,

Bill in the month of May = $3,800

Bill in the month of November = $2,000

Number of dogs washed in May = 600

Number of dogs washed in November = 200

Difference in water bill:

= Bill in the month of May - Bill in the month of November

= $3,800 - $2,000

= $1,800

Difference in number of dogs washed:

= Number of dogs washed in May - Number of dogs washed in November

= 600 - 200

= 400

Variable cost of water bill per dog washed:

= Difference in water bill ÷ Difference in number of dogs washed

= $1,800 ÷ 400

= $4.5 per unit

Fixed cost associated with the company's water bill:

= Bill in the month of May - (Number of dogs washed in May × Variable cost of water bill per dog washed) or Bill in the month of November - (Number of dogs washed in November × Variable cost of water bill per dog washed)

= [$3,800 - (600 × $4.5 per unit)] or [$2,000 - (200 × $4.5 per unit)

= ($3,800 - $2,700) or ($2,000 - $900)

= $1,100

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