through the tt intersects the Yaxis Comment he accuracy of y

through the tt intersects the Y-axis. Comment he accuracy of your high-low estimates assuming a least-squares regression analysis otal fixed costs to be $1.170.90 per month and the variable cost to be $18.18 per scan. raight line that minimizes 3. fixed costs to be $1 mated the How would the straight line that you drew in requirement 2 differ from a st the sum of the squared errors? PROBLEM 1-23A High-Low Method; Contribution Format Income Statement Milden Company has an exclusive franchise to purchase a product from the man on the retail level. As an aid in planning, the company has decided to start us income statement. To have data to prepare has developed the following cost formulas: [LOI-5, LOI-6 ufacturer and distribute it ing a contribution format such a statement, the company has analyzed its expenses and Cost Cost Formula $35 per unit sold $210,000 per quarter 6% of sales Cost of good sold Advertising expense Sales commissions .. Shipping expense.... Administrative salaries Insurance expense . . Depreciation expense .. $145,000 per quarter $9,000 per quarter $76,000 per quarter Management has concluded that shipping expense is a mixed cost, containing both variable and fixed cost elements. Units sold and the related shipping expense over the last eight quarters follow Units Sold Shipping Expense Quarter Year 1: First 10,000 16,000 18,000 15,000 $119,000 $175,000 $190,000 $164,000 Fourth .. . . Year 2: $130,000 11,000 17,000 20,000 13,000 First Second $210,000 $147,000 Milden Company\'s president would like a cost formula derived for shipping expense so that a bud- geted contribution format income statement can be prepared for the next quarter. Required: i. Using the high-low method, estimate a cost formula for shipping expense. 2. quarter of Year 3, the company plans to sell 12,000 units at a selling price of S100 per unit. Prepare a contribution format income statement for the quarter PROBLEM 1-24A Cost Classification and Cost Behavior [LOI-1, LOI-2, LOIi-3, LOI-4] The Dorilane Compan chairs. The s full capacity of 2.000 sets per year. Annual cost data at full capacity follow: y specializes in producing a set of wood patio furniture consisting of a table and four great popularity, and the company has ample orders to keep production going at its set enjoys

Solution

1. High-Low method:

Variable cost per unit = (Cost at high point - Cost at low point)/(Volume at high point - Volume at low point)

Variable shipping expense per unit = ($210000 - $119000) / (20000 - 10000) = $91000 / 10000 = $9.10

Cost formula for shipping expense: y = $28000 + $9.10x

2.

Total shipping expense at the high point $		210000
Variable costs at the high point:
Volume at the high point	20000	units
Variable cost per unit $	9.1
Total variable costs at the high point $		182000
Total fixed costs $		28000
Total shipping expense at the low point $		119000
Variable costs at the low point:
Volume at the low point	10000	units
Variable cost per unit $	9.1
Total variable costs at the low point $		91000
Total fixed costs $		28000