Waveney DIY Centers (WDC) operates a few dozen stores in the eastern United States. The stores are popular with home remodelers, contractors, and do-it-yourself customers. The managers at Waveney are interested in understanding what drives costs as well as getting better cost estimates when planning new stores. The area manager for the Southeast Region is interested in new data analysis approaches to management and offered to run a test using data from the 14 stores in the region. The initial thoughts of the managers and the financial analysts in the region were that two primary factors drove store costs: store area (square footage) and revenue. The following data were collected from the most recent year of operations (revenues and costs in thousands of dollars). Revenues (5000) Costs (5000) Store SE-01 Area (Square Feet) $ 21,545 70,147 $ 16,799 SE-02 16,482 52,417 13,495 SE-03 26,721 84,331 20,210 SE-84 20,389 68,374 16,079 SE-05 20,666 59,509 16,112 SE-06 18,756 68,374 15,099 SE-07 25,505 96,748 19,691 SE-08 13,701 47,098 11,747 SE-09 24,081 79,012 18,453 SE-10 16,830 63,055 13,864 SE-11 21,358 66,601 16,633 SE-12 18,120 73,693 14,797 SE-13 14,674 63,055 12,570 SE-14 23,904 75,466 18,294 Exercise 5-44 (Algo) Methods of Estimating Costs: High-Low (LO 5-1, 2) Required: a. Use the high-low method to estimate the fixed and variable portions of store costs based on store revenues. b. The managers in the region are interested in opening a new store with expected revenues of $20.0 million. Assuming the data and cost estimates from the current stores are appropriate for the new store (SE-15), what are the estimated store costs for store SE-15? c. Managers are also considering a "mega-store" with revenues of $32.0 million. What are the estimated store costs for the mega store? Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Required A Required B Required C Use the high-low method to estimate the fixed and variable portions of store costs based on store revenues. Note: Round variable cost percentage answer to 1 decimal place. Enter Fixed cost answer in thousands of dollars rounded to 2 decimal places. Variable cost Fixed cost 54.6 % 3,984.00 Required A Required B >

Waveney DIY Centers (WDC) operates a few dozen stores in the eastern United States. The stores are popular with home remodelers, contractors, and do-it-yourself customers. The managers at Waveney are interested in understanding what drives costs as well as getting better cost estimates when planning new stores. The area manager for the Southeast Region is interested in new data analysis approaches to management and offered to run a test using data from the 14 stores in the region. The initial thoughts of the managers and the financial analysts in the region were that two primary factors drove store costs: store area (square footage) and revenue. The following data were collected from the most recent year of operations (revenues and costs in thousands of dollars). Revenues (5000) Costs (5000) Store SE-01 Area (Square Feet) $ 21,545 70,147 $ 16,799 SE-02 16,482 52,417 13,495 SE-03 26,721 84,331 20,210 SE-84 20,389 68,374 16,079 SE-05 20,666 59,509 16,112 SE-06 18,756 68,374 15,099 SE-07 25,505 96,748 19,691 SE-08 13,701 47,098 11,747 SE-09 24,081 79,012 18,453 SE-10 16,830 63,055 13,864 SE-11 21,358 66,601 16,633 SE-12 18,120 73,693 14,797 SE-13 14,674 63,055 12,570 SE-14 23,904 75,466 18,294 Exercise 5-44 (Algo) Methods of Estimating Costs: High-Low (LO 5-1, 2) Required: a. Use the high-low method to estimate the fixed and variable portions of store costs based on store revenues. b. The managers in the region are interested in opening a new store with expected revenues of $20.0 million. Assuming the data and cost estimates from the current stores are appropriate for the new store (SE-15), what are the estimated store costs for store SE-15? c. Managers are also considering a "mega-store" with revenues of $32.0 million. What are the estimated store costs for the mega store? Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Required A Required B Required C Use the high-low method to estimate the fixed and variable portions of store costs based on store revenues. Note: Round variable cost percentage answer to 1 decimal place. Enter Fixed cost answer in thousands of dollars rounded to 2 decimal places. Variable cost Fixed cost 54.6 % 3,984.00 Required A Required B >

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter2: Basic Cost Management Concepts

Section: Chapter Questions

Problem 33P

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