Question

35 Tempe Office Services and Supplies (TOSS) provides various products and services in the Tempe Research Park, home to numerou- high-tech and bio-tech companies. Making color copies is one of its most popular and profitable services. The controller performed regression analysis of data from the Color Copy Department with the following results: 0.45 points Skipped Intercept R square Number of observations x coefficient 238.69 .968 6 .069 eBook The regression output was based on the following data: Print Number of Color Copies 17,000 21,250 22,950 18,700 20,400 25,500 Month July August September October November December Color Copy Department Costs $1,445 1.658 1,785 1,530 1,615 2,040 References Required: 1. What is the variable cost per color copy for TOSS? 2. What is the fixed cost for the Color Copy Department? 3. Based on the regression output obtained by the controller, what cost formula should be used to estimate future total costs for Color Copy Department? Enter answer as an equation in the form of y= a + bx. 5-a. Use the high-low method to estimate the variable and fixed costs for the Color Copy Department. 5-b. What cost formula should be used based on your analysis? Enter answer as an equation in the form of y= a + bx. 6. If 22,100 copies are made during January, what is the total cost predicted by each method? Complete this question by entering your answers in the tabs below. Req 1 Reg 2 Reg 3 Req SA Req SB Reg 6

Answer 1

1) Variable cost per copy of TOSS = X co-efficient value

= $0.069

= 6.9 cents

2) Fixed cost for the color copy department = Intercept value

= $238.69 per month

3) Total cost (Y) = 238.69 + 0.069 X [a + bx]

5a) High-low method:

Variable cost per unit = (Highest activity cost - Lowest activity cost) / (Highest Activity Units - Lowest Activity Units)

From the table , the number of colour copies(units) in the month of December are highest and are lowest in month of July . So those will be taken in calculation of variable cost with their respective costs .

= (2,040 - 1,445) / (25,500 - 17,000)

= $0.07

Fixed Cost = Highest Activity Cost - (Variable cost * Highest activity unit)

= 2,040 - (0.07 * 25,500)

= 2,040 - 1,785

= $255

5b) Total cost (Y) = $255 + $0.07 X per number of colour copies y = [ a + bx]

6) If 22,100 copies are made the total cost will be:

Total cost under Regression method = $238.69 + $0.069 * 22,100

= $1,763.59

Total cost under High-low method = $255 + $0.07 * 22,100

= $1,802