Question

A.

Mears Production Company makes several products and sells them for an average price of $70. Mears' accountant is considering two different approaches to estimating the firm's total monthly cost function, 1) account analysis, and 2) high-low. In both cases, she used units of production as the independent variable. For the account analysis approach, she developed the cost function by analyzing each cost item in June, when production was 1,550 units. The following are the results of that analysis: Cost Item Total Cost Fixed Cost Variable Cost Direct materials $6,975 $0 $6,975 Direct labor $8,060 $0 $8,060 Factory overhead $7,085 $3,210 $3,875 Selling expenses $5,485 $3,160 $2,325 Administrative expenses $4,100 $4,100 $0 Total expenses $31,705 $10,470 $21,235 For the high-low method, she developed the cost function using the data from June above and data from May, when production was 2,500 units and total costs were $45,614. After developing the two cost functions, the accountant used them to make predictions for the month of October, when production was expected to be 2,125 units. REQUIRED (ROUND UNIT COSTS TO THE NEAREST CENT AND TOTAL COSTS TO THE NEAREST DOLLAR.] Part A (5 tries; 5 points) 1. Using account analysis, what was the accountant's estimate of total fixed costs for October? 2. Using account analysis, what was the accountant's estimate of total variable costs for October? 提交答案 错误,Tries 4/5 以前的尝试 Part B (5 tries; 5 points) 1. Using the high-low method, what was the accountant's estimate of total fixed costs for October? 2. Using the high-low method, what was the accountant's estimate of variable costs per unit for October?

1. Using account analysis, what was the accountant's estimate of total fixed costs for October?   

2. Using account analysis, what was the accountant's estimate of total variable costs for October?

B.

1. Using the high-low method, what was the accountant's estimate of total fixed costs for October?   

2. Using the high-low method, what was the accountant's estimate of variable costs per unit for October?

Answer 1

1) $10410

Using account analysis,total variable costs for October is $10410

total fixed cost will not change with the change in activity.

2) $29112.5

Using account analysis,total variable costs for October=expected units*variable cost per unit

expected units=2125 units

variable cost per unit=total variable cost/number of units

total variable cost=$21235

number of units=1550

variable cost per unit=$21235/1550=$13.7

total fixed costs for October=2125*$13.7=$29112.5

3) $9014

Using the high-low method,

variable cost per unit=(total cost of highest activity level - total cost of lowest activity level)/(highest activity level - lowest activity level)

given

highest activity level=2500 units

lowest activity level=1550 units

total cost of highest activity level=$45614

total cost of lowest activity level=$31705

variable cost per unit=($45614-$31705)/(2500-1550)=$14.64

note: figure is rounded upto 2 decimal point.

total cost=total variable cost+total fixed cost

total fixed cost=total cost-total variable cost

for the highest activity level

total cost=$45614

total variable cost=$14.64*2500=$36600

total fixed cost=$45614-$36600=$9014

the fixed cost for october is $9014 for 2125 units. total fixed cost will not change with the change in activity.

4) $14.64

Using the high-low method,variable costs per unit for October

given

highest activity level=2500 units

lowest activity level=1550 units

total cost of highest activity level=$45614

total cost of lowest activity level=$31705

variable cost per unit=($45614-$31705)/(2500-1550)=$14.64

note: figure is rounded upto 2 decimal point.