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Cost Behavior Analysis in a Restaurant: High-Low Cost Estimation Assume a Jimmy John's restaurant has the following information available regarding costs at representative levels of

Cost Behavior Analysis in a Restaurant: High-Low Cost Estimation Assume a Jimmy John's restaurant has the following information available regarding costs at representative levels of monthly sales: Monthly sales in units 5,000 8,000 10,000 Cost of food sold $ 10,000 $ 16,000 $ 20,000 Wages and fringe benefits 4,250 4,400 4,500 Fees paid delivery help 1,250 2,000 2,500 Rent on building 1,200 1,200 1,200 Depreciation on equipment 600 600 600 Utilities 500 560 600 Supplies (soap, floor wax, etc.) 150 180 200 Administrative costs 1,300 1,300 1,300 Total $ 19,250 $ 26,240 $ 30,900 (a) Identify each cost as being variable, fixed, or mixed. Cost of food sold Fixed Mixed Variable Wages and fringe benefits Fixed Variable Mixed Fees paid delivery help Fixed Mixed Variable Rent on building Fixed Mixed Variable Depreciation on equipment Variable Fixed Mixed Utilities Variable Fixed Mixed Supplies (soap, floor wax, etc.) Variable Fixed Mixed Administrative costs Fixed Mixed Variable (b) Use the high-low method to develop a schedule identifying the amount of each cost that is fixed per month or variable per unit. Total the amounts under each category to develop an equation for total monthly costs. Round variable cost answers to two decimal places. Fixed Costs Variable Costs Cost of food sold Answer 0 Answer 2 X Wages and fringe benefits Answer 0 Answer 0.05 X Fees paid delivery help Answer 0 Answer 0.25 X Rent on building Answer 1,200 Answer 0 X Depreciation on equipment Answer 600 Answer 0 X Utilities Answer 0 Answer 0.02 X Supplies (soap, floor wax, etc.) Answer 0 Answer 0.01 X Administrative costs Answer 1,300 Answer 0 X Total costs equation Answer 3,100 Answer 2.33 X * where X = Unit sales (c) Predict total costs for a monthly sales volume of 10,000 units. $Answer 26,400

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