As the management accountant for Superior Log Cabins, Inc. you have been asked to attend a planning meeting for the 2019 season. The owner specifically wants to know how many log cabins must be sold to earn a profit of $450,000 in 2019.The company makes three models of cabins:deluxe, standard, and basic.

At the end of 2018, the local utility company began charging Superior as a mixed cost: an annual fee plus a variable cost for each kilowatt of power the company uses (rather than solely at a fixed rate).Each cabin type (all three models) requires approximately 8,000 kilowatt hours of electricity.The company needs to add that new utility cost to the projected income statement for 2019. Note that the current fixed cost estimate of $18,000 per cabin type in Table 2 is NOT related to the new utility cost.

Cabins are constructed at three separate locations (one for each model), so the utility company will estimate costs separately for each model type.The owner estimates that sales in 2019 will be 25 basic cabins, 35 deluxe cabins, and 55 standard cabins, and they will produce exactly that quantity.

The current selling price per unit is $79,000 for basic, $112,000 for deluxe, and $91,000 for standard cabins and will not increase next year. Assume that there are $150,000 of fixed administrative expenses per model and $5,500 of variable selling expenses for each cabin sold, no matter what model it is.The company uses job order costing.

5 Update the estimated 2019 costs with the predicted utility costs. 5a. Update Table 2, and add the estimated 2019 utility costs for each type of camper to the prediction of other manufacturing overhead costs in the data above. Indicate which of the above methods (Requirement 2-4 above) you are relying on for the estimate of 2019 costs.Note that the three models will be billed separately, so the fixed costs from your cost equation will apply to each model separately (not shared between the three models).

Below is the HIGH LOW METHOD that I have used- I need understanding how to update the table to reflect these changes. Can someone show me how the fixed costs will apply to each? Please help!

HIGH LOW 3a Cost 165,000 89,000 KW 294,000 115,300

3b High Low Cost per unit 129,000 26,300 4.904943

3c High-Low method: note that this method the highest level of activity and the lowest level of activity and comparing the total costs at each level. x-value y-value cost equation : y = ax + b High coordinates 294,000 165000 a = slope = variable cost low coordinates 115,300 89000 b = fixed cost Now find the slope = (yhigh - ylow)/(xhigh-xlow) slope = a = 0.425 use a point to find b = 165000 = (294000)*slope + b 39963.63 Therefore the cost equation = 0.425 0.425X + 39963.63

3d We see per above that the predicted amount of kilowatt hours is 8,000 hours Next, we can see that there are 25 basic cabins to be sold in 2019, so this means total kilowatt hours will be = 8000 * 25 = 200000 Utility cost= 0.425 200000 39963.63 124963.6

Company Fixed Variable Model Cost per Ent Costs Units Total Cost unit OM Used Basic 38, 000 25 950, 000 OIL BASIC 28, 000 25 TOO, OOD MIFE O /H \\Basic 25 18, 000 OM USEd DELUXE* 52, 000 35 1, 820, 000 OIL DELUXE 37, 000 35 1 , 295, 000 MIFE O / H DELUXE* 18, DOD 35 18, 000 OM Used Standard 43, 000 5.5 2, 365, 000 OIL Standard 32, 000 5.5 1, 760, 0OD MIFE O /H Standard 18, 000 55 18, 000