Question

Required information [The following information applies to the questions displayed below.) Part 1 of 2 Davis Stores sells clothing in 15 stores located around the southwestern United States. The managers at Davis are considering expanding by opening new stores and are interested in estimating costs in potential new locations. They believe that costs are driven in large part by store volume measured by revenue. The following data were collected from last year's operations (revenues and costs in thousands of dollars). 20 points Costs $4,334 3,054 5, 301 4,198 3,916 3,599 eBook Print 107 References Store Revenues 101 $4,180 102 2,307 103 5,858 104 4,142 105 3,034 106 4,183 6,974 108 1,899 109 5,816 110 3, 468 111 4,046 112 4,890 113 3,632 114 5,137 115 2,524 774 5,008 3,199 4,379 3,360 2,7 0 in on 3,1 o Required
I'm currently stuck on this problem even after doing exactly what my book told me to do.

Answer 1

Variable cost using high low method = (Cost at highest level of revenue – cost of lowest level)/(Difference in Revenue)

= (5149-2774)/(6974-1899)

= 46.8%

Fixed cost = Total cost – variable cost

= 5149 – 6974*46.8%

= $1,885.168

b.Estimated Overhead costs = 3,300*46.8% + 1,885.168

= $3,429.568

c.Estimated costs = 18,000*46.8% + 1885.168

= $10,309.168