Question

Assume a Potbelly's restaurant has the following information available regarding costs at representative levels of monthly sales:

	Monthly sales in units
	5,000	8,000	10,000
Cost of food sold	$ 10,000	$ 16,000	$ 20,000
Wages and fringe benefits	4,200	4,320	4,400
Fees paid delivery help	1,100	1,760	2,200
Rent on building	1,100	1,100	1,100
Depreciation on equipment	900	900	900
Utilities	800	920	1,000
Supplies (soap, floor wax, etc.)	250	340	400
Administrative costs	1,700	1,700	1,700
Total	$ 20,050	$ 27,040	$ 31,700

(a) Identify each cost as being variable, fixed, or mixed.

Cost of food sold

Variable

Fixed

Mixed

1.00 points out of 1.00

Wages and fringe benefits

Variable

Fixed

Mixed

1.00 points out of 1.00

Fees paid delivery help

Variable

Fixed

Mixed

1.00 points out of 1.00

Rent on building

Variable

Fixed

Mixed

1.00 points out of 1.00

Depreciation on equipment

Variable

Fixed

Mixed

1.00 points out of 1.00

Utilities

Variable

Fixed

Mixed

1.00 points out of 1.00

Supplies (soap, floor wax, etc.)

Variable

Fixed

Mixed

1.00 points out of 1.00

Administrative costs

Variable

Fixed

Mixed

1.00 points out of 1.00

(b) Use the high-low method to develop a schedule identifying the amount of each cost that is mixed or variable per unit. Total the amounts under each category to develop an equation for total monthly costs.

Round variable cost answers to two decimal places.

	Fixed Costs	Variable Costs
Cost of food sold	Answer	Answer	X
Wages and fringe benefits	Answer	Answer	X
Fees paid delivery help	Answer	Answer	X
Rent on building	Answer	Answer	X
Depreciation on equipment	Answer	Answer	X
Utilities	Answer	Answer	X
Supplies (soap, floor wax, etc.)	Answer	Answer	X
Administrative costs	Answer	Answer	X
Total costs equation	Answer	Answer	X

* where X = Unit sales

(c) Predict total costs for a monthly sales volume of 9,800 units.
$Answer

Answer 1