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 $4,120 $4,244 102 2,247 2,934 103 5,768 5,211 104 4,022 4,048 105 2,944 3,736 106 4,063 3,389
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 $4,120 $4,244
102 2,247 2,934
103 5,768 5,211
104 4,022 4,048
105 2,944 3,736
106 4,063 3,389
107 6,914 5,059
108 1,809 2,474
109 5,516 4,768
110 3,288 3,019
111 3,926 4,229
112 4,740 3,240
113 3,572 2,616
114 4,897 4,695
115 2,224 3,016
Required A:
- Use the high-low method to estimate the fixed and variable portions of store costs based on revenues.
Variable cost _________ %
Fixed cost _________
Required B:
- Managers estimate that one of the proposed stores will have revenues of $2.7 million. What are the estimated monthly overhead costs, assuming no inflation?
Store costs _________________
Required C:
- Managers are also considering a “mega-store” with revenues of $12 million. What are the estimated monthly overhead costs, assuming no inflation? (Do not round variable cost percentages for your calculations. Round your intermediate calculations to the nearest whole dollar. Enter your answer in thousands of dollars.)
Store costs _______________
Step by step
Solved in 3 steps
