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[The following information applies to the questions displayed below.] Caiman Distribution Partners is the Brazilian distribution...

[The following information applies to the questions displayed below.]

Caiman Distribution Partners is the Brazilian distribution company of a U.S. consumer products firm. Inflation in Brazil has made bidding and budgeting difficult for marketing managers trying to penetrate some of the country's rural regions. The company expects to distribute 450,000 cases of products in Brazil next month. The controller has classified operating costs (excluding costs of the distributed product) as follows:

Account Operating Cost Behavior
Supplies $ 1,231,000 All variable
Supervision 203,000 $ 141,000 Fixed
Truck expense 1,270,000 $ 178,000 Fixed
Building leases 865,000 $ 548,000 Fixed
Utilities 200,000 $ 115,000 Fixed
Warehouse labor 845,000 $ 139,000 Fixed
Equipment leases 777,000 $ 582,000 Fixed
Data processing equipment 955,000 All fixed
Other 838,000 $ 386,000 Fixed
Total $ 7,184,000

Although overhead costs were related to revenues throughout the company, the experience in Brazil suggested to the managers that they should incorporate information from a published index of Brazilian prices in the distribution sector to forecast overhead in a manner more likely to capture the economics of the business.

Following instructions from the corporate offices, the controller's office in Brazil collected the following information for monthly operations from last year:

Month Cases Price Index Operating Costs
1 229,000 115 $5,699,161
2 324,000 123 5,806,660
3 230,000 121 5,849,927
4 384,000 132 5,927,639
5 308,000 112 5,939,157
6 361,000 132 6,043,386
7 361,000 123 5,918,517
8 455,000 127 6,133,890
9 359,000 131 6,126,152
10 432,000 132 6,186,647
11 376,000 136 6,208,821
12 456,000 140 6,362,277

These data are considered representative for both past and future operations in Brazil.

Determine the variable cost per case assuming that 450,000 cases will be shipped next month based on the controller's analysis of accounts. (round your answer to 2 decimal places).

VARIABLE COST PER CASE _______?_____

Prepare an estimate of operating costs

ESTIMATE OF OPERATING COST _________?_________

Use the high-low method to compute an estimate of operating costs assuming that,450,000 cases will be shipped next month. (Round variable cost to 5 decimal places. Round
intermediate calculations and final answer to the nearest whole dollar amount).

ESTIMATE OF OPERATING COST    _____?__________

Enter the regression coefficients. (Round "Cases" to 5 decimal places.)

INTERCEPT _____?______
CASES ____?_______

Compute the estimation of operating costs assuming that 450,000 cases will be shipped next month by using the results of a simple regression
of operating costs on cases shipped. (Round variable costs per unit to 5 decimal places. Round the intercept and final answer to the nearest
whole dollar amount)

ESTIMATE OF OPERATING COST    _____?___________

Enter the regression coefficients. (Round "Cases" to 5 decimal places and "Price Index" to 5 decimal places.)

INTERCEPT    _______?__________
CASES    _______?__________
PRICE INDEX _________?________

Compute the estimation of operating costs assuming that 450,000 cases will be shipped next month by using the results of a multiple regression
of operating costs on cases shipped and the price level. Assume a price level of 146 for next month. (Round "Cases" and "Price Index" to 5 decimals
places. Round the final answer to the nearest whole dollar amount.

ESTIMATE OF OPERATING COST    ________?______________

Solutions

Expert Solution

1)
Operating Cost Fixed Variable
Supplies $ 12,31,000.00 $                  -   $ 12,31,000.00
Supervision $   2,03,000.00 $   1,41,000.00 $      62,000.00
Truck expense $ 12,70,000.00 $   1,78,000.00 $ 10,92,000.00
Building leases $   8,65,000.00 $   5,48,000.00 $   3,17,000.00
Utilities $   2,00,000.00 $   1,15,000.00 $      85,000.00
Warehouse labor $   8,45,000.00 $   1,39,000.00 $   7,06,000.00
Equipment leases $   7,77,000.00 $   5,82,000.00 $   1,95,000.00
Data processing equipment $   9,55,000.00 $   9,55,000.00 $                  -  
Other $   8,38,000.00 $   3,86,000.00 $   4,52,000.00
Total $ 71,84,000.00 $ 30,44,000.00 $ 41,40,000.00
a) VARIABLE COST PER CASE = Total variable cost/ TotalCases Produced = $4140000/ 450,000 $               9.20
b) ESTIMATE OF OPERATING COST = Total Fixed Cost + Variable cost per case x Number of cases produced
ESTIMATE OF OPERATING COST = 3044000 + $9.20 x 450,000 $ 71,84,000.00
2)
High-low method
Step 1 Number of Cases Total cost
High Month Month 12 4,56,000 $ 63,62,277.00
Low Month Month 1 2,29,000 $ 56,99,161.00
Difference 2,27,000 $   6,63,116.00
Step - 2 Variable cost per cases = $663116/227000 $         2.92122
Step-3
Fixed Cost = Total cost + Variable cost per case x no. of cases
Fixed Cost = 6362277 + $2.92 x 456000 $ 50,30,202.57
Cost Equation is
Overhead cost = $5030202.57 + $2.92 x No. of cases
For 450,000 cases
ESTIMATE OF OPERATING COST = $5030202.57 + $2.92 x 450,000 $ 63,44,749.70
3)
Enter the regression coefficients. (Round "Cases" to 5 decimal places.)
Simple regression based on Cases
Cases = x Operating Costs = y
2,29,000 56,99,161
3,24,000 58,06,660
2,30,000 58,49,927
3,84,000 59,27,639
3,08,000 59,39,157
3,61,000 60,43,386
3,61,000 59,18,517
4,55,000 61,33,890
3,59,000 61,26,152
4,32,000 61,86,647
3,76,000 62,08,821
4,56,000 63,62,277
SUMMARY OUTPUT
Regression Statistics
Multiple R 0.830061651
R Square 0.689002345
Adjusted R Square 0.657902579
Standard Error 112642.3207
Observations 12
ANOVA
df SS MS
Regression 1 2.81104E+11 2.81104E+11
Residual 10 1.26883E+11 12688292402
Total 11 4.07987E+11
Coefficients Standard Error t Stat
Intercept 5259218.186 164215.3493 32.0263496
X Variable 1 = Cases 2.126693748 0.451828022 4.706865548
ESTIMATE OF OPERATING COST = $5259218.186 + $2.12669 x 450,000 $ 62,16,230.37
4) Multiple Regresion based on cases and price level
Cases (x) Price Index (x) Operating Costs (y)
2,29,000 115 56,99,161
3,24,000 123 58,06,660
2,30,000 121 58,49,927
3,84,000 132 59,27,639
3,08,000 112 59,39,157
3,61,000 132 60,43,386
3,61,000 123 59,18,517
4,55,000 127 61,33,890
3,59,000 131 61,26,152
4,32,000 132 61,86,647
3,76,000 136 62,08,821
4,56,000 140 63,62,277
SUMMARY OUTPUT
Regression Statistics
Multiple R 0.878899697
R Square 0.772464678
Adjusted R Square 0.721901273
Standard Error 101560.8179
Observations 12
ANOVA
df SS MS
Regression 2 3.15155E+11 1.57578E+11
Residual 9 92831397663 10314599740
Total 11 4.07987E+11
Coefficients Standard Error t Stat
Intercept 4300291.035 548143.663 7.845189729
X Variable 1 = Cases 1.3126128 0.605561611 2.167595791
Price Level 9834.200698 5412.488232 1.816946343
Equation = 4300291.035 + 1.3126 x Cases +$9834.200 x Price level
ESTIMATE OF OPERATING COST = 4300291.035 + 1.3126 x 450,000 + 9834.200 x 146 $ 63,26,760.10

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