Caiman Distribution Partners is the Brazilian distribution company of a U.S. consumer products firm. Inflation in Brazil has made bidding and budgeting difficult for marketing managers trying to penetrate some of the country's rural regions. The company expects to distribute 450,000 cases of products in Brazil next month. The controller has classified operating costs (excluding costs of the distributed product) as follows. Account Operating Cost Behavior Supplies $ 350,000 All variable Supervision 215,000 $ 150,000 Fixed Truck expense 1,200,000 $ 190,000 Fixed Building leases 855,000 $ 550,000 Fixed Utilities 215,000 $ 125,000 Fixed Warehouse labor 860,000 $ 140,000 Fixed Equipment leases 760,000 $ 600,000 Fixed Data processing equipment 945,000 All fixed Other 850,000 $ 400,000 Fixed Total $ 6,250,000 Although overhead costs were related to revenues throughout the company, the experience in Brazil suggested to the managers that they should incorporate information from a published index of Brazilian prices in the distribution sector to forecast overhead in a manner more likely to capture the economics of the business. Following instructions from the corporate offices, the controller's office in Brazil collected the following information for monthly operations from last year. Month Cases Price Index Operating Costs 1 345,000 115 $ 5,699,139 2 362,000 117 5,806,638 3 358,000 118 5,849,905 4 380,000 122 5,927,617 5 374,000 124 5,939,135 6 395,000 125 6,043,364 7 367,000 128 5,918,495 8 412,000 133 6,133,868 9 398,000 133 6,126,130 10 421,000 132 6,186,625 11 417,000 136 6,208,799 12 432,000 139 6,362,255 These data are considered representative for both past and future operations in Brazil. Required: a-1. Determine the variable cost per case assuming that 450,000 cases will be shipped next month based on the controller's analysis of accounts. (Round your answer to 2 decimal places.) a-2. Prepare an estimate of operating costs. b. Use the high-low method to compute an estimate of operating costs assuming that 450,000 cases will be shipped next month. (Round variable cost to 5 decimal places. Round intermediate calculations and final answer to nearest whole dollar amount.)

Caiman Distribution Partners is the Brazilian distribution company of a U.S. consumer products firm. Inflation in Brazil has made bidding and budgeting difficult for marketing managers trying to penetrate some of the country's rural regions. The company expects to distribute 450,000 cases of products in Brazil next month. The controller has classified operating costs (excluding costs of the distributed product) as follows. Account Operating Cost Behavior Supplies $ 350,000 All variable Supervision 215,000 $ 150,000 Fixed Truck expense 1,200,000 $ 190,000 Fixed Building leases 855,000 $ 550,000 Fixed Utilities 215,000 $ 125,000 Fixed Warehouse labor 860,000 $ 140,000 Fixed Equipment leases 760,000 $ 600,000 Fixed Data processing equipment 945,000 All fixed Other 850,000 $ 400,000 Fixed Total $ 6,250,000 Although overhead costs were related to revenues throughout the company, the experience in Brazil suggested to the managers that they should incorporate information from a published index of Brazilian prices in the distribution sector to forecast overhead in a manner more likely to capture the economics of the business. Following instructions from the corporate offices, the controller's office in Brazil collected the following information for monthly operations from last year. Month Cases Price Index Operating Costs 1 345,000 115 $ 5,699,139 2 362,000 117 5,806,638 3 358,000 118 5,849,905 4 380,000 122 5,927,617 5 374,000 124 5,939,135 6 395,000 125 6,043,364 7 367,000 128 5,918,495 8 412,000 133 6,133,868 9 398,000 133 6,126,130 10 421,000 132 6,186,625 11 417,000 136 6,208,799 12 432,000 139 6,362,255 These data are considered representative for both past and future operations in Brazil. Required: a-1. Determine the variable cost per case assuming that 450,000 cases will be shipped next month based on the controller's analysis of accounts. (Round your answer to 2 decimal places.) a-2. Prepare an estimate of operating costs. b. Use the high-low method to compute an estimate of operating costs assuming that 450,000 cases will be shipped next month. (Round variable cost to 5 decimal places. Round intermediate calculations and final answer to nearest whole dollar amount.)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Account	Operating Cost	Behavior
Supplies	$	350,000	All variable
Supervision		215,000	$	150,000	Fixed
Truck expense		1,200,000	$	190,000	Fixed
Building leases		855,000	$	550,000	Fixed
Utilities		215,000	$	125,000	Fixed
Warehouse labor		860,000	$	140,000	Fixed
Equipment leases		760,000	$	600,000	Fixed
Data processing equipment		945,000	All fixed
Other		850,000	$	400,000	Fixed
Total	$	6,250,000

Although overhead costs were related to revenues throughout the company, the experience in Brazil suggested to the managers that they should incorporate information from a published index of Brazilian prices in the distribution sector to forecast overhead in a manner more likely to capture the economics of the business.

Following instructions from the corporate offices, the controller's office in Brazil collected the following information for monthly operations from last year.

Month	Cases	Price Index		Operating Costs
1	345,000	115	$	5,699,139
2	362,000	117		5,806,638
3	358,000	118		5,849,905
4	380,000	122		5,927,617
5	374,000	124		5,939,135
6	395,000	125		6,043,364
7	367,000	128		5,918,495
8	412,000	133		6,133,868
9	398,000	133		6,126,130
10	421,000	132		6,186,625
11	417,000	136		6,208,799
12	432,000	139		6,362,255

These data are considered representative for both past and future operations in Brazil.

Required:

a-1. Determine the variable cost per case assuming that 450,000 cases will be shipped next month based on the controller's analysis of accounts. (Round your answer to 2 decimal places.)

a-2. Prepare an estimate of operating costs.

b. Use the high-low method to compute an estimate of operating costs assuming that 450,000 cases will be shipped next month. (Round variable cost to 5 decimal places. Round intermediate calculations and final answer to nearest whole dollar amount.)

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