Question

Problem 2-26A (Algo) Estimating fixed and variable cost LO 2-6 Adams Computer Services, Inc. has been in business for six months. The following are basic operating data for that period: Month July Aug. Sept. Oct. Nov. Dec. Service hours 114 138 256 428 322 324 $5,928 $ 4,300 $22,256 $11,150 $16,744 $ 9,200 $7,176 $5,250 $13,312 $16,848 $10,510 Revenue $ 7,160 Operating costs Required a. What is the average service revenue per hour in each month and the overall average for the six-month period? b. Use the high-low method to estimate the total monthly fixed cost and the variable cost per hour. c. Determine the average contribution margin per hour.

Answer 1

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a) Average Service revenue per hour & overall average pes hous Sep Oct Nov Dec Total Jules Revenue 5928 7176 | 13312 22256.1674416898.82264 Seguice 119 138 986 428 322 324 1582 Hours Average 52 52 52 52 52 52 52 rwenue overall Auerge 6) Using high-low method to estimate total monthly fixed cost & variable cost per hour High low) High low Out operati 1150 4300 Cost Hours 428 114

Page lowest - Variable cost p.h . Highest. operating cost operating Higher - cost lowest service service her hour 111.50 -4300 428 - 114 6850 314 .: variable cost/ha 8182 Vecial Fixed Cost = (Hours x variable Costp.b) - Operating cost =(114x21:82) - 4300 - 1813 Fixed cost = 1813

Page c) Delea mining average contri pih Jul | Aug Sep Oct Nov Dec | Total Revenue 5928 7176 13312 22256 16794 16848 82264 =) Vari 2487 301 5586 9339 7026 7070 34518 cost (Q1.82X (21.82x (21.82x(2182X (21.828 (21.82% 114) 138) 256) 428) 322) 324) Contri 3441 41657726 12917 9718 9778 47795 service Houss 114 | 138 256 428 322 324 1582 Average 30018 p.h 30.18 30.18 30.18 30.18 contre UOSO.LOSOOO D00 S 30.18 30.18