Question

In: Accounting

Leslie Sporting Goods is a locally owned store that specializes in printing team jerseys. The majority...

Leslie Sporting Goods is a locally owned store that specializes in printing team jerseys. The majority of its business comes from orders for various local teams and organizations. While Leslie’s prints everything from bowling team jerseys to fraternity/sorority apparel to special event shirts, summer league baseball and softball team jerseys are the company’s biggest source of revenue.

A portion of Leslie’s operating information for the company’s last year follows:

Number of Operating
Month Jerseys Printed Cost
January 200 $5,785
February 220 5,865
March 535 8,635
April 675 9,725
May 630 9,275
June 430 6,245
July 340 6,170
August 250 5,940
September 175 4,880
October 320 6,050
November 260 5,980
December 195 4,930


Required:
3.
Using the high-low method, calculate the store’s total fixed operating costs and variable operating cost per jersey.

Fixed cost -

Variable cost per jersey -
4. Using the high-low method results, calculate the store’s expected operating cost if it printed 475 jerseys.

Total Cost -
5. Perform a least-squares regression analysis on Leslie’s data.

Intercept -

X Variable 1 -
6. Using the regression output, create a linear equation (y = a + bx) for estimating Leslie’s operating costs.

Total cost = ________+ _____ Total number of jerseys
7. Using the least-squares regression results, calculate the store’s expected operating cost if it prints 635 jerseys.

Total cost -

Solutions

Expert Solution

Number of month Jerseys printed(X) Cost (Y) x^2 XY
January 200 $5,785 $40,000 $1,157,000
February 220 $5,865 $48,400 $1,290,300
March 535 $8,635 $286,225 $4,619,725
April 675 $9,725 $455,625 $6,564,375
May 630 $9,275 $396,900 $5,843,250
June 430 $6,245 $184,900 $2,685,350
July 340 $6,170 $115,600 $2,097,800
August 250 $5,940 $62,500 $1,485,000
September 175 $4,880 $30,625 $854,000
October 320 $6,050 $102,400 $1,936,000
November 260 $5,980 $67,600 $1,554,800
December 195 $4,930 $38,025 $961,350
4230 $79,480 $1,828,800 $31,048,950
Highest level of activity 675 $9,725
Lowest level of activity 175 $4,880
Difference 500 $4,845
3. Variable cost per jersey $9.69 (4845/500)
Fixed cost $3,184.25 (9725-675*9.69)
4. Total cost of printing 475 Jerseys $7,787 (3184.25+475*9.69)
5. Variable cost per unit (12*31048950)-(4230*79480)/(12*1828800-4230^2)
Variable cost per unit = $8.98
Total fixed Cost (79480-8.98*4230)/12
3458.43
Equation = y = 3458.43 + 8.98x
Intercept = 8.98
6. Total cost = 3458.43 + 8.98* Total No. of Jerseys
7. Cost of printing 635 jerseys = 3458.43 + 8.98* 635
Cost of printing 635 jerseys = $9,160.73

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