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Activity Cost Driven and Cost Estimation Cool Mountain lee Cream Company produces ten varieties of ice cream in large vats, several thousand gallons at a

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Activity Cost Driven and Cost Estimation Cool Mountain lee Cream Company produces ten varieties of ice cream in large vats, several thousand gallons at a tune. The see cream is distributed to several categories of customers. Some ice cream is packaged in large containers and sold to college and university food services. Some is packaged in half gallon or small containers and sold through wholesale distributors to grocery stores. Finally, some is packaged in a variety of individual servings and sold directly to the public from trucks owned and operated by Cod Mountain Management has always assumed that costs fluctuated with the volume of ice cream, and cost estimating equations have been based on the following cost function: Estimated costs = Fixes! costs + Variable costs per gallon Times Production in gallons Lately, how ever, this equation has not been a very accurate predictor of total costs. At the same tune, management has noticed that the volumes and varieties of ice cream sold through the three distinct distribution channels have fluctuated from month to month. Required What relevant major assumption is inherent in the cost estimating equation currently used by Cod Mountain? Why might Cod Mountain wish to develop a cost estimating equation that recognizes the hierarchy of activity costs? Explain. Develop the general form of a more accurate cost estimating equation for Cod Mountain Clearly label and explain all elements of the equation, and provide specific examples of costs for each element

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