Cost Behavior Analysis in a Restaurant: High-Low Cost Estimation Assume a Papa J
ID: 2597189 • Letter: C
Question
Cost Behavior Analysis in a Restaurant: High-Low Cost Estimation Assume a Papa John's restaurant has the following information available regarding costs at representative levels of monthly sales: Monthly sales in units 5,000 8,000 10,000 Cost of food sold $10,000 $16,000 $20,000 Wages and fringe benefits 4,200 4,320 4,400 Fees paid delivery help 1,100 1,760 2,200 Rent on building 1,100 1,100 1,100 Depreciation on equipment 900 900 900 Utilities 800 920 1,000 Supplies (soap, floor wax, etc.) 250 340 400 Administrative costs 1,700 1,700 1,700 Total $20,050 $27,040 $31,700 Use the high-low method to develop a schedule identifying the amount of each cost that is fixed per month or variable per unit. Total the amounts under each category to develop an equation for total monthly costs. Round variable cost answers to two decimal places. Please show the work.
Explanation / Answer
Solution :-
Particulars 5000 8000 10000 Variable cost per unit Total Fixed cost Nature of Cost Cost of Goods Sold $10000 $16000 $20000 $2.00 0 Variable Wages and Fringe Benefits $4200 $4320 $4400 $0.04 $4000 Mixed Fees paid delivery help $1100 $1760 $2200 $0.22 0 Variable Rent on Building $1100 $1100 $1100 $0 $1100 Fixed Dep. on Equipment $900 $900 $900 $0 $900 fixed Utilities $800 $920 $1000 $0.04 $600 Mixed Supplies $250 $340 $400 $0.03 $100 Mixed Administrative Costs $1700 $1700 $1700 $0 $1700 fixed Total $25050 $35040 $41700 $2.33 $8400