Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Question 5: Cost structure estimation month activity volume in units total costs Oct 90 $7,425 Nov 70 $7,500 Dec 105 $9,250 a) Which cost structure
Question 5: Cost structure estimation month activity volume in units total costs Oct 90 $7,425 Nov 70 $7,500 Dec 105 $9,250 a) Which cost structure estimation method should we use? account classification method high-low method b) To identify the low and high points, we should look for lowest/highest costs lowest/highest activity c) Estimate the cost structure parameters: total FC= unit VC= Write down the total cost equation TC = + * volume d) Predict the total costs of producing 80 units: TC = Enter a number e) Can we use the estimates from (c) to predict costs at volume of 5,000 units? YES: Just plug in volume=5,000 in the total cost equation. NO: 5,000 units is outside the relevant range (the normal range of activity is around 70-105 units)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started