Question

2. 3. LULU with the fleet of trucks. Express the variable and fixed costs in the form Y = a +bX. If a truck were driven 80,000 kilometers during a year, what total oper expect to be incurred? a year, what total operating cost would you EXERCISE 5A-4 High-Low Method; Scattergraph Analysis L05-10 Archer Company is a wholesaler of custom-built air-conditioning unit It gathered the following monthly data relating to units shipped and total shipping m-built air-conditioning units for commercial buildings. hits shipped and total shipping expense: Month Units Shipped January February .. March. ........ April......... May ....... June........ July ...... NOW Total Shipping Expense $1,800 $2,300 $1,700 $2,000 $2,300 $2,700 $1,200

Answer 1

1.

	Units Shipped	Shipping Expense
July	2	1200
January	3	1800
March	4	1700
April	5	2000
February	6	2300
May	7	2300
June	8	2800
Units Shipped Shipping Expense + o 2 4 6

Yes, there is a linear relationship between the shipping expense and the number of units shipped. You can see that the shipping expense increase with the increase in the number of units shipped, While the average shipping expense per unit shipped decreases with an increase in the number of units shipped.

2. Using the High Low Method,

First, determine the variable cost component:

Variable Cost = (HAC−LAC) divide by (HAU - LAU)​

Where: HAC = Highest activity cost and LAC = Lowest activity cost

HAUs=Highest activity units and LAU = Lowest activity units

Variable Cost = (2700-1200)/(8-2)

= 250

Now, calculate the Fixed Cost,

FC = HAC−(Variable Cost×HAUs)​

= 2700 - (250*8)

= 700

Therefore the Cost formula is as follows,

Cost = Fixed Cost + (Units Shipped* Variable Cost)

For Eg. 4 units

Cost = 700 + (4*250)

Cost = 1700

3.   

30 15 -15 -10 -15 -10 -5 4 5 10 15 15 20 25 30 35 20 25 30 35

y = 2.179x + 9.107

4. There are various other factors affecting the shipping expenses of an organization.

Fuel costs: The cost of maritime and land transport is, of course, related to the price of fuel. As fuel prices fall, container ships and cargo trucks become cheaper to operate and the price of transport goes down.

Intended destination: The intended destination is an important factor when it comes to calculating ocean freight rates. In simple terms, the longer the journey, the exorbitant the ocean shipping rates and vice-versa.

The Labour Market: Increasing wages and competition among carriers can have an upward impact on shipping costs.

Season: For certain goods, the season becomes a very important factor. Grains and fruits transported during a particular freight season will have higher cargo rates and vice versa.

Currency: In today’s times, the common denomination used for international transaction purposes is the dollar. Ocean freight rate depends on the fluctuating rate of exchanges and therefore is likely to be levied on the latest prevailing exchange rate

Customer loyalty: Merchants who can offer a carrier regularly, consistent business are well placed to receive a preferential rate, especially if demand across the industry is low.         

Government regulation: Regulation may directly impact the freight industry and its bottom line; for example, governments often set maximum driving hours for commercial operators. Other government regulations may also impact freight costs. If there is any delay in ship reaching the port because of over-crowding, then there might be a fine imposed which affects the ocean shipping rates

Geopolitical events: International maritime shipping has become fraught with the dangers of pirates and rogue governments.