Question

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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    ________?______________

Answer 1

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