Davis Stores sells clothing in 15 stores located around the southwestern United States. The managers at Davis are considering expanding by opening new stores and are interested in estimating costs in potential new locations. They believe that costs are driven in large part by store volume measured by revenue. The following data were collected from last year’s operations (revenues and costs in thousands of dollars). Store Revenues Costs 101 $4,240 $4,424 102 2,367 3,174 103 5,948 5,391 104 4,262 4,348 105 3,124 4,096 106 4,303 3,809 107 7,034 5,239 108 1,989 3,074 109 6,116 5,248 110 3,648 3,379 111 4,166 4,529 112 5,040 3,480 113 3,692 2,976 114 5,377 4,935 115 2,824 3,196 Required a. Use the high-low method to estimate the fixed and variable portions of store costs based on revenues. b. Managers estimate that one of the proposed stores will have revenues of $3.9 million. What are the estimated monthly overhead costs, assuming no inflation? c. Managers are also considering a “mega-store” with revenues of $24 million. What are the estimated monthly overhead costs, assuming no inflation?
Davis Stores sells clothing in 15 stores located around the southwestern United States. The managers at Davis are considering expanding by opening new stores and are interested in estimating costs in potential new locations. They believe that costs are driven in large part by store volume measured by revenue. The following data were collected from last year’s operations (revenues and costs in thousands of dollars). Store Revenues Costs 101 $4,240 $4,424 102 2,367 3,174 103 5,948 5,391 104 4,262 4,348 105 3,124 4,096 106 4,303 3,809 107 7,034 5,239 108 1,989 3,074 109 6,116 5,248 110 3,648 3,379 111 4,166 4,529 112 5,040 3,480 113 3,692 2,976 114 5,377 4,935 115 2,824 3,196 Required a. Use the high-low method to estimate the fixed and variable portions of store costs based on revenues. b. Managers estimate that one of the proposed stores will have revenues of $3.9 million. What are the estimated monthly overhead costs, assuming no inflation? c. Managers are also considering a “mega-store” with revenues of $24 million. What are the estimated monthly overhead costs, assuming no inflation?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
100%
Davis Stores sells clothing in 15 stores located around the southwestern United States. The managers at Davis are considering expanding by opening new stores and are interested in estimating costs in potential new locations. They believe that costs are driven in large part by store volume measured by revenue. The following data were collected from last year’s operations (revenues and costs in thousands of dollars).
| Store | Revenues | Costs |
| 101 | $4,240 | $4,424 |
| 102 | 2,367 | 3,174 |
| 103 | 5,948 | 5,391 |
| 104 | 4,262 | 4,348 |
| 105 | 3,124 | 4,096 |
| 106 | 4,303 | 3,809 |
| 107 | 7,034 | 5,239 |
| 108 | 1,989 | 3,074 |
| 109 | 6,116 | 5,248 |
| 110 | 3,648 | 3,379 |
| 111 | 4,166 | 4,529 |
| 112 | 5,040 | 3,480 |
| 113 | 3,692 | 2,976 |
| 114 | 5,377 | 4,935 |
| 115 | 2,824 | 3,196 |
Required
a. Use the high-low method to estimate the fixed and variable portions of store costs based on revenues.
b. Managers estimate that one of the proposed stores will have revenues of $3.9 million. What are the estimated monthly
c. Managers are also considering a “mega-store” with revenues of $24 million. What are the estimated monthly overhead costs, assuming no inflation?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education