Karen Jungemann, owner of Rose Ready, operates a local chain of floral shops. Each shop has its own delivery van. Instead of charging a flat delivery fee, Jungemann wants to set the delivery fee based on the distance driven to deliver the flowers. Jungemann wants to separate the fixed and variable portions of her van operating costs so that she has a better idea how delivery distance affects these costs. She has the following data from the past seven months: E (Click the icon to view the data.) Use the high-low method to determine Rose Ready's cost equation for van operating costs. Use your results to predict van operating costs at a volume of 16,500 miles Let's begin by determining the formula that is used to calculate the variable cost (slope). Change in cost Change in volume = Variable cost (slope) Now determine the formula that is used to calculate the fixed cost component. Total operating cost Total variable cost Fixed cost %3D Use the high-low method to determine Rose Ready's operating cost equation. (Round the variable cost to the nearest cent and the fixed cost to the nearest whole dollar.) y =

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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Karen Jungemann, owner of Rose Ready, operates a local chain of floral shops. Each shop has its own delivery van. Instead of charging a flat delivery fee,
Jungemann wants to set the delivery fee based on the distance driven to deliver the flowers. Jungemann wants to separate the fixed and variable portions of her van
operating costs so that she has a better idea how delivery distance affects these costs. She has the following data from the past seven months:
E (Click the icon to view the data.)
Use the high-low method to determine Rose Ready's cost equation for van operating costs. Use your results to predict van operating costs at a volume of 16,500 miles
Let's begin by determining the formula that is used to calculate the variable cost (slope).
Change in cost
Change in volume
Variable cost (slope)
Now determine the formula that is used to calculate the fixed cost component.
Total operating cost
Total variable cost
Fixed cost
Use the high-low method to determine Rose Ready's operating cost equation. (Round the variable cost to the nearest cent and the fixed cost to the nearest whole
dollar.)
y =
X +
Transcribed Image Text:Karen Jungemann, owner of Rose Ready, operates a local chain of floral shops. Each shop has its own delivery van. Instead of charging a flat delivery fee, Jungemann wants to set the delivery fee based on the distance driven to deliver the flowers. Jungemann wants to separate the fixed and variable portions of her van operating costs so that she has a better idea how delivery distance affects these costs. She has the following data from the past seven months: E (Click the icon to view the data.) Use the high-low method to determine Rose Ready's cost equation for van operating costs. Use your results to predict van operating costs at a volume of 16,500 miles Let's begin by determining the formula that is used to calculate the variable cost (slope). Change in cost Change in volume Variable cost (slope) Now determine the formula that is used to calculate the fixed cost component. Total operating cost Total variable cost Fixed cost Use the high-low method to determine Rose Ready's operating cost equation. (Round the variable cost to the nearest cent and the fixed cost to the nearest whole dollar.) y = X +
Month
Miles Driven
Van Operating Costs
January
15,900
$5,420
February .....
18,000
$5,460
March
15,300
$5,100
.....
April ...
16,300
$5,290
May
17,000
$5,520
June
15,700
$5,150
July ..
15,000
$4,950
Transcribed Image Text:Month Miles Driven Van Operating Costs January 15,900 $5,420 February ..... 18,000 $5,460 March 15,300 $5,100 ..... April ... 16,300 $5,290 May 17,000 $5,520 June 15,700 $5,150 July .. 15,000 $4,950
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High low method is a method used for cost estimation in which costs at highest level of activity and costs at lowest level of activity are considered for the purpose of cost estimation for future

 

 

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