Question
Davis Stores sells clothing in 15 stores located around the southwestern United States. The managers at Davis are considering expanding by opening new stores and
Davis Stores sells clothing in 15 stores located around the southwestern United States. The managers at Davis are considering expanding by opening new stores and are interested in estimating costs in potential new locations. They believe that costs are driven in large part by store volume measured by revenue. During a discussion, one of the managers suggests that number of employees might be better at explaining cost than store revenues. As a result of that suggestion, managers collected the following information from last years operations (revenues and costs in thousands of dollars):
Required
a. Use the high-low method to estimate the fixed and variable portions of store costs based on employees. (Do not round your intermediate calculation. Negative amounts should be indicated by a minus sign. Round your answer to the nearest whole number (in thousands of dollars).)
! Required information [The following information applies to the questions displayed below.) Davis Stores sells clothing in 15 stores located around the southwestern United States. The managers at Davis are considering expanding by opening new stores and are interested in estimating costs in potential new locations. They believe that costs are driven in large part by store volume measured by revenue. During a discussion, one of the managers suggests that number of employees might be better at explaining cost than store revenues. As a result of that suggestion, managers collected the following information from last year's operations (revenues and costs in thousands of dollars): Store 101$ 102 103 104 105 106 107 108 109 110 111 112 113 114 115 Costs 4,214 2,894 5,181 3,998 3,676 3,319 5,029 2,374 4,688 2,959 4,179 3,200 2,556 4,655 2,986 Employees 39 $ 29 47 38 33 38 54 26 44 35 37 41 35 42 28 Revenues 4,100 2,227 5,738 3,982 2,914 4,023 6,894 1,779 5,416 3,228 3,886 4,699 3,552 4,817 2,124 Required a. Use the high-low method to estimate the fixed and variable portions of store costs based on employees. (Do not round your intermediate calculation. Negative amounts should be indicated by a minus sign. Round your answer to the nearest whole number (in thousands of dollars).) Variable cost (per employee) Fixed costStep by Step Solution
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