Question

Caiman Distribution Partners is the Brazilian distribution company of a U.S. consumer products firm. Inflation in Brazil has made bidding and budgeting difficult for marketing managers trying to penetrate some of the country's rural regions. The company expects to distribute 450,000 cases of products in Brazil next month. The controller has classified operating costs (excluding costs of the distributed product) as follows.

Account	Operating Cost			Behavior
Supplies	$	562,000		All variable
Supervision		202,000		$	145,000	Fixed
Truck expense		1,260,000		$	209,000	Fixed
Building leases		874,000		$	550,000	Fixed
Utilities		205,000		$	120,000	Fixed
Warehouse labor		872,000		$	131,000	Fixed
Equipment leases		753,000		$	599,000	Fixed
Data processing equipment		933,000		All fixed
Other		854,000		$	408,000	Fixed
Total	$	6,515,000

Determine the variable cost per case assuming that 450,000 cases will be shipped next month based on the controller's analysis of accounts. (Round your answer to 2 decimal places.)

a-2. Prepare an estimate of operating costs.

a-1.	Variable cost per case
a-2.	Estimate of operating cost

Answer 1

Answer
A1	Estimating Equation based on account analysis
	Cost Item	Operating Cost	Fixed Cost	Variable
	Supplies	$            562,000	$                   -	$         562,000
	Supervision	$            202,000	$         145,000	$           57,000
	Truck Expense	$         1,260,000	$         209,000	$      1,051,000
	Building Leases	$            874,000	$         550,000	$         324,000
	Utilities	$            205,000	$         120,000	$           85,000
	Warehouse Factor	$            872,000	$         131,000	$         741,000
	Equipment leases	$            753,000	$         599,000	$         154,000
	Data Processing Equipment	$            933,000	$         933,000	$                   -
	Other	$            854,000	$         408,000	$         446,000
	Total	$         6,515,000	$      3,095,000	$      3,420,000
	Variable Cost per case	Total Variable Cost/Cases Produced
		$3,420,000 /450000
		7.6 per case
A2	Estimate OH	Fixed OH +variable OH per case *no of cases
		$3095000+$7.60*450000
		$         6,515,000