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CHAPTER 3 High Low Method Forecasting a Mixed Cost Page 1 In Class Practice Vesuvio's Pizzeria Page 3 HIGH-LOW METHOD Labor Cost Employee Hours January
CHAPTER 3 High Low Method Forecasting a Mixed Cost Page 1 In Class Practice Vesuvio's Pizzeria Page 3 HIGH-LOW METHOD Labor Cost Employee Hours January $ 7,000 360 February $ 8,140 550 March $ 9,899 630 April $ 9,787 610 May $ 8,490 480 June $ 7,450 350 July $ 9,490 570 August $ 7,531 310 FYI: Total Cost=Total Fixed Cost +(Variable Rate * Activity) Step 1. Find the High Low Activity for the data set Step 2. Estimate the Variable Rate per unit using the High Low data VARIABLE RATE = High Activity Cost-Low Activity Cost High Activity-Low Activity = = Step 3. Estimate the fixed cost component using high point data Fixed Cost= Total Cost at High Point - (Variable Rate X Activity at High Point) Step 4: Form the cost formula for labor cost Total Cost = Fixed Cost from Step 3 + (Variable Rate from step 2 * Employee Hours) Step 5. Estimate the total labor cost for September based on 675 Employee Hours Use your Formula created in step 4 to solve. Show your work.
| CHAPTER 3 High Low Method Forecasting a Mixed Cost | |||||||||||
| Page 1 | In Class Practice | Vesuvio's Pizzeria | Page 3 | ||||||||
| HIGH-LOW METHOD | |||||||||||
| Labor | Cost | Employee Hours | |||||||||
| January | $ 7,000 | 360 | |||||||||
| February | $ 8,140 | 550 | |||||||||
| March | $ 9,899 | 630 | |||||||||
| April | $ 9,787 | 610 | |||||||||
| May | $ 8,490 | 480 | |||||||||
| June | $ 7,450 | 350 | |||||||||
| July | $ 9,490 | 570 | |||||||||
| August | $ 7,531 | 310 | |||||||||
| FYI: Total Cost=Total Fixed Cost +(Variable Rate * Activity) | |||||||||||
| Step 1. Find the High Low Activity for the data set | |||||||||||
| Step 2. Estimate the Variable Rate per unit using the High Low data | |||||||||||
| VARIABLE RATE | = | High Activity Cost-Low Activity Cost | |||||||||
| High Activity-Low Activity | |||||||||||
| = | = | ||||||||||
| Step 3. Estimate the fixed cost component using high point data | |||||||||||
| Fixed Cost= Total Cost at High Point - (Variable Rate X Activity at High Point) | |||||||||||
| Step 4: Form the cost formula for labor cost | |||||||||||
| Total Cost = Fixed Cost from Step 3 + (Variable Rate from step 2 * Employee Hours) | |||||||||||
| Step 5. Estimate the total labor cost for September based on 675 Employee Hours | |||||||||||
| Use your Formula created in step 4 to solve. Show your work. | |||||||||||
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Government and Not-for-Profit Accounting Concepts and Practices
Authors: Michael H. Granof, Saleha B. Khumawala, Thad D. Calabrese, Daniel L. Smith
8th edition
1119495814, 1119495857, 1119495819, 9781119495819 , 978-1119495857
