In: Accounting
Problem 18-2A Scatter diagram and cost behavior estimation LO P1
[The following information applies to the questions displayed below.]
Alden Co.’s monthly unit sales and total cost data for its
operating activities of the past year follow. Management wants to
use these data to predict future fixed and variable costs.
Month | Units Sold | Total Cost | Month | Units Sold | Total Cost | |||||||||||||||
1 | 322,000 | $ | 159,500 | 7 | 358,000 | $ | 263,504 | |||||||||||||
2 | 167,000 | 103,250 | 8 | 272,000 | 153,750 | |||||||||||||||
3 | 267,000 | 207,600 | 9 | 75,600 | 63,000 | |||||||||||||||
4 | 207,000 | 102,000 | 10 | 152,000 | 132,625 | |||||||||||||||
5 | 292,000 | 203,500 | 11 | 96,000 | 96,000 | |||||||||||||||
6 | 192,000 | 114,000 | 12 | 102,000 | 79,650 | |||||||||||||||
Problem 18-2A Part 2
2. Estimate both the variable costs per unit and the total monthly fixed costs using the high-low method. (Do not round intermediate calculations.)
|
Month | Units Sold | Total Cost | ||||||
1 | 322000 | 1,59,500 | ||||||
2 | 167000 | 1,03,250 | ||||||
3 | 267000 | 2,07,600 | ||||||
4 | 207000 | 1,02,000 | ||||||
5 | 292000 | 2,03,500 | ||||||
6 | 192000 | 1,14,000 | ||||||
7 | 358000 | 2,63,504 | ||||||
8 | 272000 | 1,53,750 | ||||||
9 | 75600 | 63,000 | ||||||
10 | 152000 | 1,32,625 | ||||||
11 | 96000 | 96,000 | ||||||
12 | 102000 | 79,650 | ||||||
Units | Total Cost | |||||||
Maximum Level | 358000 | 2,63,504 | ||||||
Minimum Level | 75600 | 63,000 | ||||||
High-Low method - Calculation of Variable Cost per Sales Dollar |
||||||||
Change in cost | Cost at high point minus cost at low point | (263504-63000) | 2,00,504 | 0.71 | (200504/282400) | |||
Change in volume | Volume at high point minus volume at low point | (358000-75600) | 282400 | |||||
High-Low method - Calculation of Fixed Costs | ||||||||
Total cost at the high point | 2,63,504 | |||||||
Variable costs at the high point: | ||||||||
Volume at the high point: | 358000 | |||||||
Variable cost per sales dollar | 0.71 | |||||||
Total variable costs at the high point | 254180 | |||||||
Total fixed costs | 9,324 | |||||||
Total cost at the low point | 63,000 | |||||||
Variable costs at the low point: | ||||||||
Volume at the low point: | 75,600 | |||||||
Variable cost per sales dollar | 0.71 | |||||||
Total variable costs at the low point | 53676 | |||||||
Total fixed costs | 9,324 | |||||||