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Cost Behavior Analysis in a Restaurant. High-Low Cost Estimation Assume a Papa John's restaurant has the following information available regarding costs at representative levels of monthly sales: Monthly sales in units 5,000 8,000 10,000 $10.000 $16,000 $20,000 4.200 4.320 4,400 Cost of food sold Wages and fringe benefits Fees paid delivery help Rent on building Depreciation on equipment Utilities Supplies (soap, floor wax, etc.) Administrative costs Total 1.200 1,920 2.400 1.300 1,300 1.300 500 500 500 800 920 1.000 200 260 300 1,600 1,600 1.600 $19.800 $26,820 $31.500

Cost Behavior Analysis in a Restaurant. High-Low Cost Estimation Assume a Papa John's restaurant has the following information available regarding costs at representative levels of monthly sales: Monthly sales in units 5,000 8,000 10,000 $10.000 $16,000 $20,000 4.200 4.320 4,400 Cost of food sold Wages and fringe benefits Fees paid delivery help Rent on building Depreciation on equipment Utilities Supplies (soap, floor wax, etc.) Administrative costs Total 1.200 1,920 2.400 1.300 1,300 1.300 500 500 500 800 920 1.000 200 260 300 1,600 1,600 1.600 $19.800 $26,820 $31.500

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Cost Behavior Analysis in a Restaurant: High-Low Cost Estimation Assume a Papa John's restaurant has the following information available regarding costs at representative levels of monthly sales: Cost of food sold Wages and fringe benefits Fees paid delivery help Rent on building Depreciation on equipment Utilities Supplies (soap, floor wax, etc.) Administrative costs Total (a) Identify each cost as being variable, fixed, or mixed. Cost of food sold Wages and fringe benefits Fees paid delivery help Rent on building Depreciation on equipment Utilities Supplies (soap, floor wax, etc.) Fixed Administrative costs Fixed Monthly sales in units 5,000 8,000 10,000 $10.000 $16,000 $20,000 4,200 4,320 4,400 1,200 1,920 2,400 1,300 1,300 1,300 500 500 500 800 920 1.000 200 260 300 1,600 1,600 1.600 $19.800 $26,820 $31.500 Cost of food sold Wages and fringe benefits Fees paid delivery help Rent on building Depreciation on equipment Utilities Supplies (soap, floor wax, etc.). Administrative costs Total costs equation Variable + Mixed Variable + Fixed Fixed Mixed (b) Use the high-low method to develop a schedule identifying the amount of each cost that is fixed per month or variable per unit. Total the amounts under each category to develop an equation for total monthly costs. Round variable cost answers to two decimal places. $ Fixed Costs 0 $ 4,000 ✓ 0✔ 1,100 x 900 x 600 ✓ 100 ✓ 1,700 x 8,400 x S $ ✔ • ✓ ● ✓ # # Variable Costs 2✔ X 0.04 X 0.22 X X 0X 0✔ X 0.04 X 0.03 x X 0✔ X 2.33 x X (c) Predict total costs for a monthly sales volume of 9,100 units. $ 31,234 x
Transcribed Image Text:Cost Behavior Analysis in a Restaurant: High-Low Cost Estimation Assume a Papa John's restaurant has the following information available regarding costs at representative levels of monthly sales: Cost of food sold Wages and fringe benefits Fees paid delivery help Rent on building Depreciation on equipment Utilities Supplies (soap, floor wax, etc.) Administrative costs Total (a) Identify each cost as being variable, fixed, or mixed. Cost of food sold Wages and fringe benefits Fees paid delivery help Rent on building Depreciation on equipment Utilities Supplies (soap, floor wax, etc.) Fixed Administrative costs Fixed Monthly sales in units 5,000 8,000 10,000 $10.000 $16,000 $20,000 4,200 4,320 4,400 1,200 1,920 2,400 1,300 1,300 1,300 500 500 500 800 920 1.000 200 260 300 1,600 1,600 1.600 $19.800 $26,820 $31.500 Cost of food sold Wages and fringe benefits Fees paid delivery help Rent on building Depreciation on equipment Utilities Supplies (soap, floor wax, etc.). Administrative costs Total costs equation Variable + Mixed Variable + Fixed Fixed Mixed (b) Use the high-low method to develop a schedule identifying the amount of each cost that is fixed per month or variable per unit. Total the amounts under each category to develop an equation for total monthly costs. Round variable cost answers to two decimal places. $ Fixed Costs 0 $ 4,000 ✓ 0✔ 1,100 x 900 x 600 ✓ 100 ✓ 1,700 x 8,400 x S $ ✔ • ✓ ● ✓ # # Variable Costs 2✔ X 0.04 X 0.22 X X 0X 0✔ X 0.04 X 0.03 x X 0✔ X 2.33 x X (c) Predict total costs for a monthly sales volume of 9,100 units. $ 31,234 x
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