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Mears Production Company makes several products and sells them for an average price of $75. Mears' accountant is considering two different approaches to estimating the
Mears Production Company makes several products and sells them for an average price of $75. 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 February, when production was 1,950 units. The following are the results of that analysis: Total Cost Fixed Cost Variable Cost Cost Item Direct materials $7,800 $0 $7,800 $9,750 Direct labor $9,750 SO Factory overhead $7,715 $3,230 $4,485 Selling expenses $5,840 $3,500 $2,340 $4,800 $4,800 $0 Administrative expenses Total expenses $35,905 $11,530 $24,375 For the high-low method, she developed the cost function using the data from February above and data from May, when production was 2,450 units and total costs were $43,304. After developing the two cost functions, the accountant used them to make predictions for the month of October, when production was expected to be 2,300 units. , , REQUIRED (ROUND UNIT COSTS TO THE NEAREST CENT 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 October? 2. Using account analysis, what was the accountant's estimate of variable costs per unit for October? ** Tries 0/5 Part B (5 tries; 5 points) 1. Using the high-low method, what was the accountant's estimate of total fixed costs for October? 2. Using the high-low method, what was the accountant's estimate of total variable costs for October? Tries 0/5
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