Question
Phillips Company manufactures air-conditioning units for commercial buildings and has noticed considerable variation in shipping expenses from month to month as per the data below:
Phillips Company manufactures air-conditioning units for commercial buildings and has noticed considerable variation in shipping expenses from month to month as per the data below:
MonthUnits ShippedTotal Shipping Expense
January4$2,200
February4$3,100
March5$2,600
April2$1,290
May3$2,190
June6$3,000
July8$4,320
Required:
1.Which two months should be used if Phillips wants to estimate the behaviour of shipping expenses using the high-low method?
2.Using the high-low method, what is the variable cost per unit to ship air conditioners?
3.What is the fixed cost of shipping air conditioners?
4.What is the cost formula for shipping expenses?
5.If seven air conditioners are shipped in August, estimate the total shipping expenses.
8.If the air conditioners have an average sales price of $7,100, variable direct manufacturing costs are $3,550 per unit, variable manufacturing overhead costs are $1,420 per unit, and variable selling and administration costs (excluding shipping) are $280 per unit, what is the contribution margin per unit?
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