John Stern operates a retail store. The business is studying order processing costs behavior and has gathered the following data for a recent seven-month period. Month Sales Order Order Processing Costs June 3,000 $40,000 July 1,500 $28,000 August 4,000 $65,000 September 2,800 $39,000 October 2,300 $32,000 November 1,000 $20,000 December 2,000 $30,000 Determine the variable cost per sales order and the fixed cost using the high-low method. What is the equation of the total mixed cost function? Prepare the scatter gram, clearly showing any outliers. Using the “line of best fit”, determine Stern’s fixed cost per month and the variable cost per sales order In view of Stern’s cost behavior pattern, which of the two methods appear more appropriate? Explain your answer.
John Stern operates a retail store. The business is studying order processing costs behavior and has gathered the following data for a recent seven-month period. Month Sales Order Order Processing Costs June 3,000 $40,000 July 1,500 $28,000 August 4,000 $65,000 September 2,800 $39,000 October 2,300 $32,000 November 1,000 $20,000 December 2,000 $30,000 Determine the variable cost per sales order and the fixed cost using the high-low method. What is the equation of the total mixed cost function? Prepare the scatter gram, clearly showing any outliers. Using the “line of best fit”, determine Stern’s fixed cost per month and the variable cost per sales order In view of Stern’s cost behavior pattern, which of the two methods appear more appropriate? Explain your answer.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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- John Stern operates a retail store. The business is studying order
processing costs behavior and has gathered the following data for a recent seven-month period.
|
Month |
Sales Order |
Order Processing Costs |
|
June |
3,000 |
$40,000 |
|
July |
1,500 |
$28,000 |
|
August |
4,000 |
$65,000 |
|
September |
2,800 |
$39,000 |
|
October |
2,300 |
$32,000 |
|
November |
1,000 |
$20,000 |
|
December |
2,000 |
$30,000 |
Determine the variable cost per sales order and the fixed cost using the high-low method.
What is the equation of the total mixed cost function?
Prepare the scatter gram, clearly showing any outliers.
Using the “line of best fit”, determine Stern’s fixed cost per month and the variable cost per sales order
In view of Stern’s cost behavior pattern, which of the two methods appear more appropriate? Explain your answer.
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