High-Low Method

Luisa Crimini has been operating a beauty shop in a college town for the past 10 years. Recently, Luisa rented space next to her shop and opened a tanning salon. She anticipated that the costs for the tanning service would primarily be fixed, but found that tanning salon costs increased with the number of appointments. Costs for this service over the past 8 months are as follows:

Required:

1. Which month represents the high point? The low point?

2. Using the high-low method, compute the variable rate for tanning. Compute the fixed cost per month. Round the variable rate per tanning appointment to the nearest cent.

3. Using the variable rate and fixed cost, what is the cost formula for tanning services?

4. Calculate the total predicted cost of tanning services for September for 2,500 appointments using the formula found in Requirement 3. Of that total cost, how much is the total fixed cost for September? How much is the total predicted variable cost for September? In your calculations, round variable cost per unit to the nearest cent. If required, round the final answers to the nearest dollar.

5. Which of the following statements is correct when luisa uses the high-low method to estimate the costs?

Eagle Sawmill Limited (Eagle) operates a timber sawmill in a large regional town. It sources its raw material (pine logs) from a number of local growers and from its own plantations. Logs are transported on large trucks that are weighed in on the company’s weighbridge and weighed out after dropping their loads in the storage area. Logs are then debarked and sawn to size in the cutting area of the mill. The various logs are then sent to other areas of the sawmill depending on what they will be used for.

You are a senior on the audit. During the planning stage of the audit, you perform analytical procedures. In the current audit period, the average number of days to pay creditors has declined significantly from the average recorded over the past three financial years. Your investigation reveals that log suppliers represent more than 90 percent of the value of accounts payable. As an internal control, details of the goods received notes are matched against the supplier’s invoice. The accuracy of the invoice is checked, after which the invoice is authorised for payment by the mill accountant. Any discrepancy between what the supplier’s invoice amounts should be and the actual amount charged by the supplier is communicated to the supplier by way of a pre-numbered ‘request for credit’ form. This form provides reasons for the differences and the amount requested to be credited to the company by the supplier.

The correct amount of the invoice is entered into the accounts payable accounting system and the supplier’s monthly statement is reconciled to the accounts payable balance per the creditors’ ledger at month end. The differences are mostly attributable to:

 Unprocessed invoices due to pricing differences

 Timing differences in the recorded date of a payment made

 Amounts requested for credit

 Settlement discounts disallowed.

Lee Hayward, the company’s financial controller, informs you that due to the increase in the price of timber, new contracts with suppliers have been negotiated over the past year. The accounts payable personnel have complained that management is too slow in informing them about the effective dates of the implementation of the contracts and the revised prices. A brief inspection of the accounts payable reconciliations for five of the biggest suppliers indicates that many invoices are being held back due to the lack of correct pricing.

Required

a) List two key assertions at risk in relation to accounts payable;

b) Provide your justification for each assertion.

c) For each assertion, outline two substantive tests of details to obtain sufficient appropriate audit evidence.

Consider the following selected data for the Spanish Town Manufacturing 4. Company for 2009.

Budgeted manufacturing overhead $7,000,000
Budgeted machine-hours 200,000
Actual manufacturing overhead $6,800,000
Actual machine-hours 195,000

The company uses normal costing. Its job costing system has a single manufacturing overhead cost pool. Costs are allocated to jobs using a budgeted machine-hour rate. Any amount of under- or over-allocation is written off to Cost of Goods Sold.

a) Compute the budgeted manufacturing overhead rate.

b) Calculate the manufacturing overhead allocated during 2009

c) Compute the amount of under or over the allocation of manufacturing overhead. Do you believe the amount is material? Prepare a journal entry to dispose of this amount.

Consider a town in which only two residents, Raphael and Susan, own wells that produce water safe for drinking. Raphael and Susan can pump and sell as much water as they want at no cost. For them, total revenue equals profit. The following table shows the town's demand schedule for water.

Suppose Raphael and Susan form a cartel and behave as a monopolist. The profit-maximizing price isper gallon, and the total output isgallons. As part of their cartel agreement, Raphael and Susan agree to split production equally. Therefore, Raphael's profit is, and Susan's profit is.

Suppose that Raphael and Susan have been successfully operating as a cartel. They each charge the monopoly price and sell half of the monopoly quantity. Then one night before going to sleep, Raphael says to himself, "Susan and I aren't the best of friends anyway. If I increase my production to 35 gallons more than the cartel amount, I can increase my profit even though her profit goes down. I will do that starting tomorrow."

After Raphael implements his new plan, the price of water toper gallon. Given Susan and Raphael's production levels, Raphael's profit becomes and Susan's profit becomes.

Because Raphael has deviated from the cartel agreement and increased his output of water to 35 gallons more than the cartel amount, Susan decides that she will also increase her production to 35 gallons more than the cartel amount.

After Susan increases her production, Raphael's profit becomes, Susan's profit becomes, and total profit (the sum of the profits of Raphael and Susan) is now.

True or False: Based on the fact that both Raphael and Susan increased production from the initial cartel quantity, you know that the output effect was larger than the price effect at that quantity.

True

False

Note that Raphael and Susan started by behaving cooperatively. However, once Raphael decided to cheat, Susan decided to cheat as well. In other words, Susan's output decisions are based on Raphael's actions.

This behavior is an example of .

Problem #4 – Logical Operators: Movie Ticket Price

The local movie theater in town has a ticket price of $12.00.

But, if you are a senior (55 and older), or are under 10, or are seeing a matinee which screens from 3 pm to 5 pm, you get the discounted price of $7.00, nice!

Hint 1: "55 and older" is INCLUSIVE

Hint 2: under 10 is EXCLUSIVE

Hint 3: the range 3 to 5 is INCLUSIVE

Hint 4: limit 1 per patron (i.e., it doesn’t compound)

Hint 5: considering there’s 3 am and pm and 5 am and pm, using a 24-hour clock (aka military time) may be an easier option (0000 to 2359)

Determine which of the two prices the customer is eligible for.

• Givens:

  • Time of Movie (Assume whole numbers here)

  • Age of the customer

• Result To Print Out:

  • "The ticket price is X"

Must use C# coding using conditional statements

Joe has just moved to a small town with only one golf​ course, the Northlands Golf Club. His inverse demand function is

p=140−2​q,

where q is the number of rounds of golf that he plays per year. The manager of the Northlands Club negotiates separately with each person who joins the club and can therefore charge individual prices. This manager has a good idea of what​ Joe's demand curve is and offers Joe a special​ deal, where Joe pays an annual membership fee and can play as many rounds as he wants at ​$40, which is the marginal cost his round imposes on the Club. What membership fee would maximize profit for the​ Club? The manager could have charged Joe a single price per round. How much extra profit does the Club earn by using​ two-part pricing?

The​ profit-maximizing membership fee​ (F) is

​$_________.

​(Enter your response as a whole​ number.)

Question B.2

Leyton and Dustin run a service station in a country town, the service station sells petrol and a number of other goods, which are displayed near the cash register and outside the office. Leyton and Dustin are partners in the business, though they have an old written agreement that states that neither will order goods or services over the value of $3,000 unless the contract contains signatures from both partners.

Leyton has been approached by a supplier of magazines who offers the business the delivery of 100 copies of a particular publication each month. Leyton convinced that the magazine is popular and will make some money, signs a contract with a promise to pay $5,000 in instalments for the delivery of the magazines.

The magazines arrive and Dustin is very upset, first because the magazine is quite unsuitable for display in the business and may result in a loss of customers if they see this publication, but he is also upset that Leyton has made an agreement without consulting him. There is an argument between the partners and Leyton takes sick leave and stays at home to recover from the stress of the argument. In the meantime, Dustin communicates with the supplier of the magazines and declares that the agreement to supply the publication is invalid due to a breach of the partnership agreement, and that the magazines will be returned and no payments will be forthcoming from the business.

Explain, with reference to partnership law:

a.     Whether Dustin can cancel the contract with supplier of the magazines?       

[Answer here]

b.     Whether Dustin can be liable for the actions of Leyton?                          

Please solve the questions below and show your work. Thank you.

The town of Utopia has three equal-size groups of people: (i) type A people consistently prefer larger
public parks to smaller; type B people prefer small public parks to large public parks, and they prefer
large size to medium size parks; type C people most prefer medium size to small size public parks, which
they in turn prefer by a modest amount to large levels.

a. Draw on a graph the preferences of the three groups of individuals. Which types of people have
single-peaked preferences? Which have multi-peaked preferences?

b. Will round-robin majority voting generate consistent outcomes in this case? Why or why not?

3. Two pink slime producers, XL and IPSP, are located in an otherwise pastoral mountain town. Each producer emits 30 tons of ammonium hydroxide into the atmosphere each year. City planners wish to cut the level of ammonium hydroxide pollution to 50 tons overall.

a. Alfred B. Packer steps forward with the following suggestion. “Make each firm cut emissions by 5 tons. That seems fair, doesn’t it?” Do you agree? Explain your answer.

b. Suppose that XL and IPSP are both capable of reducing emissions by 5 tons, but that it costs XL $50, and IPSP $100, to clean up each ton of emissions. Comment on the fairness of Packer’s proposal in light of this additional information.

c. If you were the “King of the World” and hoped to clean up the ammonium hydroxide at the lowest possible cost, how would you split the burden of the cleanup between XL and IPSP?

d. Suppose the city goes to a tradable permits system for reducing ammonium hydroxide emissions. It prints 50 permits, each of which gives the bearer the right to emit 1 ton of ammonium hydroxide. It then distributes 25 permits each to XL and IPSP, and informs both that they are free to buy and sell the permits to each other.

i. When permits are traded, who will be the likely buyer of permits, and who will be the likely seller? Explain.

ii. What is the lowest price that you expect pollution permits to sell for?

iii. What is the highest price you expect pollution permits to sell for?

vi. When trade is complete, how many permits do you expect to see sold?

v. Under the tradable permits system, how much of the cleanup does XL end up being responsible for? How does this outcome compare to your answer to (c)?

1. High-Low Method

   Luisa Crimini has been operating a beauty shop in a college town for the past 10 years. Recently, Luisa rented space next to her shop and opened a tanning salon. She anticipated that the costs for the tanning service would primarily be fixed, but found that tanning salon costs increased with the number of appointments. Costs for this service over the past 8 months are as follows:

   		Tanning
   Month		Appointments			Total Cost
   January		800			$1,758
   February		2,100			$2,150
   March		3,200			$2,790
   April		2,500			$2,500
   May		1,600			$1,800
   June		2,200			$2,255
   July		2,150			$2,300
   August		3,000			$2,640

   Required:

   1. Which month represents the high point? The low point?

   High point
   Low point

   In your calculations, round per unit costs to the nearest cent.

   2. Using the high-low method, compute the variable rate for tanning. Compute the fixed cost per month. Round the variable rate per tanning appointment to the nearest cent and use it in your further calculations. Round the fixed cost per month to the nearest dollar and use it in your further calculations.

   Variable rate for tanning	$ per tanning appointment
   Fixed cost per month	$

   3. Using the variable rate and fixed cost, what is the cost formula for tanning services?
   
   

   4. Calculate the total predicted cost of tanning services for September for 2,500 appointments using the formula found in Requirement 3. Of that total cost, how much is the total fixed cost for September? How much is the total predicted variable cost for September? If required, round the final answers to the nearest dollar.

   Total predicted cost for September	$
   Total fixed cost for September	$
   Total predicted variable cost for September	$

   5. Which of the following statements is correct when luisa uses the high-low method to estimate the costs?