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Mears Production Company makes several products and sells them for an average price of $85. Mears' accountant is considering two different approaches to estimating the
Mears Production Company makes several products and sells them for an average price of $85. Mears' accountant is considering two different approaches to estimating the firm's total monthly cost function, 1) account analysis, and 2) high-low. In both cases, she used units of production as the independent variable. For the account analysis approach, she developed the cost function by analyzing each cost item in June, when production was 1,500 units. The following are the results of that analysis: Cost Item Total Cost Fixed Cost Variable Cost Direct materials $5,700 $0 $5,700 Direct labor $7,500 $0 $7,500 Factory overhead $7,860 $3,210 $4,650 Selling expenses $5,240 $3,140 $2,100 Administrative expenses $3,900 $3,900 $0 Total expenses $30,200 $10,250 $19,950 For the high-low method, she developed the cost function using the data from June above and data from May, when production was 2,500 units and total costs were $44,703. After developing the two cost functions, the accountant used them to make predictions for the month of December, when production was expected to be 2,100 units. REQUIRED (ROUND UNIT COSTS TO TWO DECIMAL PLACES AND TOTAL COSTS TO THE NEAREST DOLLAR.] Part A (5 tries; 5 points) 1. Using account analysis, what was the accountant's estimate of total fixed costs for December? 2. Using account analysis, what was the accountant's estimate of variable costs per unit for December? Submit Answer Tries 0/5 Previous Tries Part B (5 tries; 5 points) 1. Using the high-low method, what was the accountant's estimate of total fixed costs for December? 2. Using the high-low method, what was the accountant's estimate of total variable costs for December? Submit Answer Tries 0/5
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