Question

ARTB Mona Western University operates a Laundromat, solely for the purpose of providing ering services to students in dance. You have been hired as an accounting ouder. wlyze the cost of the laundering services. The university administration has assembled me dats welve month period pertaining to the monthly total cost of providing the service and the corresponding number of students who used the laundering faolinties each month The table below shows the monthly data collected over the academic year under review Manth Total of Students Laundering Costs Laundering 188 800 1200 213 100 232.000 2.000 248 200 261,700 2550 269,800 2.700 242,800 2.200 March 250,900 2.350 Annl 253,600 2.400 226,600 1,900 169.900 181,800 May June a) Determine the variable cost per student and the fixed cost using the high-low method (3 marks) b) What is the equation of the total mixed cost function? (2 marks) e) in August of the upcoming academic year, the university expects the number of students using the Laundromat to increase to 3,400. What is the expected total laundering cost for August? (2 marks) d) From the data set given, generate the scatter diagram for Mona Western University, clearly showing the line of best fit (trend line) (4 marks) e) Using the trend line, determine Mona University's fixed cost per month and the variable cost per student. (use 0 5 2,500 students.) (4 marks) Based on the scatter gram, what is the equation of the total mixed cost function? (3 marks) g) Which of the two methods would be more appropriate? Explain your answer. (2 marks)

Answer 1

High Low Method Difference in Laundering Costs Difference In Number of Students Laundering Number of students (A) High level of activity Low level of activity Change in activity 2700 700 2000 Total Laundering Costs (B) 269800 161800 108000 Variable Cost ( BIA) 54.00 Per student Determine the fixed cost component using the high-low method Number of students Total Laundering Costs Less Variable component (2700*5 Fixed component 2,700 269,800 145,800 124,000 700 161,800 37,800 (700*54) 124,000 47 48 b) Total Costs = $124000 + 54 * Number of students 49 50 C) Total Laundering Cost for August = 124000 + 54 * 3400 Total Laundering Cost for August = 307600

Month August September October November December January February March April May June July Total Laundering Costs Number of students Laundering 188800 1200 213100 1650 232000 2000 248200 2300 261700 2550 269800 2700 242800 2200 250900 2350 253600 2400 226600 1900 169900 850 161800 700 300000 250000 200000 150000 100000 50000 0 Total Laundering Costs Predicted Total Laundering Costs + 0 1000 2000 3000

SUMMARY OUTPUT 81 Regression Statistics Multiple R R Square Adjusted R Square Standard Error Observations 1.03698E-11 ANOVA df SS F gnificance F 1.32E+32 6.1E-157 Regression Residual Total MS 14200920000 1.42E+10 1.07533E-21 1.08E-22 14200920000 10 11 Coefficients 124000 Intercept Number of students Laundering Standard Error t Stat P-value Lower 95%Upper 95%ower 95.09pper 95.0% 9.41662E-12 1.32E+16 1.6E-157 124000 124000 124000 124000 4.69902E-15 1.15E+16 6.1E-157 54 54 54 54 54

124000 Fixed Cost Variable Cost 54 117 e) 118 119 120 f) 121 Total Cost = 124000+54*Number of students