Question

Davis Stores sells clothing in 15 stores located around the southwestern United States. The managers at Davis are considering expanding by opening new stores and are interested in estimating costs in potential new locations. They believe that costs are driven in large part by store volume measured by revenue. During a discussion, one of the managers suggests that number of employees might be better at explaining cost than store revenues. As a result of that suggestion, managers collected the following information from last year’s operations (revenues and costs in thousands of dollars):

Store		Costs		Employees		Revenues
101	$	4,214		39	$	4,100
102		2,894		29		2,227
103		5,181		47		5,738
104		3,998		38		3,982
105		3,676		33		2,914
106		3,319		38		4,023
107		5,029		54		6,894
108		2,374		26		1,779
109		4,688		44		5,416
110		2,959		35		3,228
111		4,179		37		3,886
112		3,200		41		4,690
113		2,556		35		3,552
114		4,655		42		4,817
115		2,986		28		2,124

b. Use the results of your high-low analysis to estimate the cost for a store with 30 employees. (Do not round your intermediate calculation. Enter your answers in thousands of dollars.)

Find the Store cost $

Answer 1

Find the Store cost $ 2,909

Please leave comment in case of any query or confusion..

Working

No of Employees	30
Variable cost	$        4,010.00
Fixed cost	$     (1,101.33)
Total cost	$        2,908.67

		Cost	No. of activities
A	High Level	$             5,181.00	47
B	Low Level	$             2,374.00	26
C=A-B	Difference	$             2,807.00	$                    21.00
A	Cost difference	$             2,807.00
B	No. of activities difference	21
C=A/B	Variable cost per unit	$                133.67
		High Level	Low Level
A	No. of activities	47	26
B	Variable cost per unit	$              133.667	$               133.667
C=AxB	Total Variable cost	$             6,282.33	$              3,475.33
D	Total cost	$             5,181.00	$              2,374.00
E=D-C	Total fixed cost	$          (1,101.33)	$            (1,101.33)