Question
Your company is considering an expansion and preparing budgets with and without the expanded activities. You have been asked to predict the cost of shipping
Your company is considering an expansion and preparing budgets with and without the expanded activities. You have been asked to predict the cost of shipping at several different activity levels. You believe pounds shipped is a good cost driver and you have gathered historical data from the last 6 accounting periods, as summarized in the following table:
Total cost of shipping Number of pounds shipped
Period 1 93740 25000
Period 2 75040 19500
Period 3 82350 22400
Period 4 82260 21300
Period 5 76800 19900
Period 6 89700 23800
You choose to use the High-Low method of estimating the fixed and variable components of a mixed cost. 1. What is the variable cost per pound? (Round to the nearest penny) 2. What is the fixed cost per period for shipping? (Round to the nearest dollar) 3. Use your results to predict the total cost of shipping in period 7 if 39000 pounds are expected.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Solution 1 To calculate the variable cost per pound we can use the HighLow method which assumes that ...Get Instant Access to Expert-Tailored Solutions
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Step: 2
Step: 3
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