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looking at Cost behaviour and Analysis of mixed costs using the high-low method. I understand the concept of using the high-low method but I have
looking at Cost behaviour and Analysis of mixed costs using the high-low method.
I understand the concept of using the high-low method but I have come across a question where the high low for my costs does not match up with the high low for the sales in units. which do I use? For example: my shipping costs high low are in May and April, but my sales in units high low are in June and April. Do I use the cost high and low and the corresponding units high and low, or the units high and low and the corresponding cost high and low?
The Central Valley Company is a manufacturing firm that produces and sells a single product. The company's revenues and expenses for the last four months are given below Central Valley Company Comparative Monthly Income Statements March April May June 6,300 6,550 $754,000$851,500 425,750 5,800 Sales in units Sales revenue $819,000 417,000 6,700 $871,000 439,000 Less: Cost of goods sold 389,500 Gross margin 402,000 364,500 425,750432,000 Less: Operating expenses Shipping expense Advertising expense 74 400 83,000 189,600 10,300 69,400 83,000 172,800 10,300 52,000 77,650 83,000 190,300 10.300 52.000 77,500 83,000 193,500 10,300 52,000 Salaries & commissions Insurance expense Depreciation expense 52,000 Total operating expenses 409,300387,500 413.250416,300 Net income 5 (7.300)$(23,000) 12.500 15,700 Required: 1. Management is concerned about the losses experienced during the spring and would tike to know more about the cost behaviour Develop a cost equation for each of the costs COGS Shipping Salaries and commissionsYS 39,400S 23X
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