Question

value: 1.66 points Cubicle Solutions sells productivity software such as word processors, spreadsheets, and personal informa can call in with technical questions about the installation and use of Cubicle products. Monthly data on the number of support calls and call center costs for the last year have been collected and Month Support Calls 46 NOWN- Call Center Cost $569 690 680 580 740 700 680 710 700 635 655 640 Required: a. Estimate the monthly fixed costs and the unit variable cost per support call using the high-low estimation me dollars.) Overhead Costs = per call pport calls b. Draw a scattergraph relating call center costs to the number of support calls. Instructions: 1. On the graph below. use the point tool to plot the point corresponding to the call center costs to the rel 2. Repeat the process for the remainder of the sample (Month 2, Month 3, ...). 3. To enter exact coordinates, double click on the point and enter the exact co-ordinates of x and y. High-Low Method, Scattergraph Cubicle Solutions Month

Answer 1

Answer to Question a:

High Low Method: It is a method that is used to bifurcate variable and fixed cost while considering the activity levels. It uses highest and lowest activity levels and considers the cost that was incurred at these activity levels. Calculation of Variable Cost Per Unit: The formula that is used to calculate variable cost per unit using high low method is: Variable cost per unit = Cost at highest activity - Cost at lowest activity Highest activity units - Lowest activity units Substitute the cost at highest activity amounting to $740, cost at lowest activity amounting to $569, highest activity units of 64 support calls and lowest activity units of 46 support calls to calculate variable cost per unit as follows: $740 - $569 Variable cost per unit = - 64 - 46 $171 18 $9.50

Answer to Question a:

Calculation of Total Fixed Cost: Total Fixed cost = Cost at highest activity - (Variable cost per unit X Highest activity units) Cost at lowest activity and lowest activity units can also be used instead of highest in the above formula Substitute the cost at highest activity amounting to $740, variable cost per unit amounting to $9.50 and highest activity units of 64 support calls to calculate total fixed cost as follows: Total fixed cost = $740 - ($9.50 X 64) = $740 - $608 = $132 Answer to Question a: Overhead Cost = $132 + $9.50 per call X Support Calls

Answer to Question b:

Month Total Cost Number of Support Calls 1 46 2 58 54 4 5 48 64 56 Calculation 569 ($132 + ($9.5 X 46) 683 ($132 + ($9.5 X 58) 645 ($132 + ($9.5 X 54) 588 ($132 + ($9.5 X 48) 740 ($132 + ($9.5 X 64) 664 ($132 + ($9.5 X 56) 636 ($132 + ($9.5 X 53) 674 ($132 + ($9.5 X 57) 702 ($132 + ($9.5 X 60) 598 ($132 + ($9.5 X 49) 617 ($132 + ($9.5 X 51) 607 ($132 + ($9.5 X 50) 53 57 9 10 11 12 60 49 51 50

Graph:

Total Cost using High Low Method Amount in $ 45 C 47 49 51 59 61 63 65 53 55 57 Number of Support Calls