Comprehensive Exercise-Page 81 Philips Company manufacturing air-conditioning units for c riation in shipping expenses from month to month as per the data below: ommercial buildings and has noticed Month January February March April May Units Shipped 4 4 Total Shipping Expense $2,200 $3,100 $2,600 $1,500 2 $2,200 June $3,000 July $3,600 3-1 Which two months should be used if Philips wants to estimate the behavior of shipping expenses using the high-low method? 3-2 Using the high--low method, what is the variable cost per unit to ship air conditioners? 3-3 What is the fixed cost of shipping air conditioners? 3-4 What is the cost formula for shipping expenses? 3-5 If seven air conditioners are shipped in August, estimate the total shipping expenses? 3-6 If nine air conditioners are shipped in September, estimate the fixed shipping expenses. 3-7 If 10 air conditioners are shipped in October, estimate the variable shipping expense.
high low method = [ total shipping cost at highest level of units shipped - total shipping cost at lowest evel of units shipped ] / [highest level of units shipped - lowest level of units shipped]
3-1] July (for $3600 at 8units ) and April (for $1500 at 2 units )
3-2] variable cost per unit = [ $3600 - $1500] / [8-2]
= $2100 / 6
=$350 per unit
3-3] fixed cost:
$3600 -$350 * 8 units = $1500 - $350 * 2
$3600 -$2800 = $1500 - $700
$800 = $800
Fixed cost = $800
3-4] y = $800 + $350 * x
3-5] Total shipping expenses for 7 air conditioners = $800 + $350 * 7
= $3250
3-6] Total Fixed shipping expenses for 9 air conditioners = $800
Note:- Fixed expenses remain same, irrespective of output
3-7 Total variable shipping expenses for 10 air conditioners = $350 * 10
= $3500
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