Problem 1
The following information is available for Alba Company's maintenance cost over the last four months.
|
Month
|
Maintenance hours
|
Maintenance cost
|
|
January
|
150
|
$6,000
|
|
February
|
120
|
$5,100
|
|
March
|
240
|
$8,100
|
|
April
|
210
|
$6,900
|
Required:
Use the high-low method to estimate both the fixed and variable component of its maintenance cost.
Problem 2
For each of the following, determine if the cost is variable or fixed.
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Variable Cost
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Fixed Cost
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Materials used in production
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Production supervisor salary
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Production line worker wages
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Building rent
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Commissions
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Advertising costs
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Maintenance costs
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Real Estate Taxes
|
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Shipping costs
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Internet Service
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Problem 3
Cost Description
1 Cost of renting production equipment on a monthly basis at a surfboard manufacturer
2 Cost of shipping bags of garden mulch to a retail garden store
3 Building rent at a sandwich shop
4 Cost of hard disk installed in a computer
5 Cost of fresh vegetables used at a sandwich shop
6 Janitorial wages at a surfboard manufacturer
7 Cost of advertising at a surfboard company
8 Clinical supplies at a doctor's office
9 Cost of leasing checkout equipment on a monthly basis at an electronics store
10 Cost of heating an electronics store
Required:
For each item above, indicate whether the cost is MAINLY fixed or variable
Problem 4
Shaw Supply Company sells a single product. Last year they sold 15,000 units and had the following average:
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Variable cost per unit
|
$2.45
|
|
|
Fixed cost per unit
|
4.75
|
|
|
Total cost per unit
|
$7.20
|
Required:
Determine the following amounts at a sales level of 18,000 units:
a. Total variable cost
b. Total fixed cost
c. Variable cost per unit
d. Fixed cost per unit
e. Total cost per unit
Problem 5
Farnor, Inc., would like to estimate the variable and fixed components of its electrical costs and has compiled the following data for the last four months of operations.
|
|
|
Machine Hours
|
Electrical Cost
|
|
|
January
|
30
|
$75
|
|
|
February
|
42
|
$90
|
|
|
March
|
35
|
$81
|
|
|
April
|
20
|
$68
|
Required:
Use the high-low method:
1. Estimate both the fixed and variable component of its electrical cost.
2. If they expect 41 machine hours in May, what is their estimated total cost.