Assume a Papa John\'s restaurant has the following information available regardi

Question

Assume a Papa John's restaurant has the following information available regarding costs at representative levels of monthly sales:

$31,500

(a) 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.

(b) Predict total costs for a monthly sales volume of 9,100 units.

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 1,200 1,920 2,400 Rent on building 1,300 1,300 1,300 Depreciation on equipment 500 500 500 Utilities 800 920 1,000 Supplies (soap, floor wax, etc.) 200 260 300 Administrative costs 1,600 1,600 1,600 Total $19,800 $26,820

$31,500

(a) 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.

Fixed Costs Variable Costs Cost of food sold Answer Answer Wages and fringe benefits Answer Answer Fees paid delivery help Answer Answer Rent on building Answer Answer Depreciation on equipment Answer Answer Utilities Answer Answer Supplies (soap, floor wax, etc.) Answer Answer Administrative costs Answer Answer Total costs equation Answer Answer

(b) Predict total costs for a monthly sales volume of 9,100 units.

Explanation / Answer

b) Total cost = 8100 + (2.34*9100)

               = 8100 + 21294

               = $ 29394

Nature Fixed variable COGS Variable 10000/5000 = 2 Wages Mixed 4200 - (.04*5000) = 4000 [(4320-4200)/(8000-3000)] =[120/3000] = .04 Fees paid Variable 1200/5000 = .24 Rent Fixed 1300 Depreciation Fixedv 500 Utilities mixed [800 -(.04*5000) =600 [(920-800)/(8000-5000) ] =[120/3000] = .04) supplies mixed [200-(.02*5000)] =100 [(260-200)/(8000-5000)] =[60/3000] = .02 administation fixed 1600 Total 8100 2.34

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