Question

Problem 4-4 Lancer Audio produces a high-end DVD player that sells for $1,300. Total operating expenses for July were as follows: 150 $71,000 2,500 25,000 2,300 5,600 Units produced and sold Component costs Supplies Assembly labor Rent Supervisor salary Electricity Telephone Gas Shipping Advertising Administrative costs Total 350 280 300 2,000 2,600 15,000 $126,930 Total operating expenses for the past 12 months are as follows: August September October November December January February March April Units Produced and Sold 165 130 150 145 155 170 140 150 145 150 140 135 Cost $140,345 116,990 130,650 127,670 133,790 143,910 123,520 130,950 127,385 129,865 122,720 120,255 May June July

Answer 1

1)
Using Regression
Fixed Cost (Intercept)	$   28,968.56
Variable Cost per Unit (Slope)	$        676.30	per unit
2)
	Variable Cost		Fixed Cost
Component cost	$   71,000.00	Rent	2300
Supplies	$     2,500.00	Supervisory salary	5600
Assembly labor	$   25,000.00	Electricity	350
Shipping	$     2,000.00	Telephone	280
Total	$ 100,500.00	Gas	300
Units produced and sold	150	Advertising	2600
Variable Cost per unit = 100,500/150	$        670.00	Administrative costs	15000
		Total	$ 26,430.00
Using account analysis
Fixed Cost	$   26,430.00
Variable Cost per Unit	$        670.00	per unit
Using High Low Method
	Month	unit	Cost
High	January	170	143,910
Low	September	130	116,990
Difference		40	26920
Variable Cost per Unit = 26920/40	$        673.00	Per unit
Fixed Cost
$143,910 - (170 x 673)	$   29,500.00
3) Regression Approach provides the best estimate.

Units Produced and Sold 165 130 150 145 155 1 Lancer Audio produces a high-end DVD player that sells for $1,300. 2 Total operating expenses for the past 12 months are as follows: 3 Month 4 August 5 September 6 October 7 November 8 December 9 January 10 February 11 March 12 April 13 May 14 June 15 July 16 1) 17 Using Regression 18 Fixed Cost (Intercept) 19 Variable Cost per Unit (Slope) 170 140 Cost 140345 116990 130650 127670 133790 143910 123520 130950 127385 129865 122720 120255 150 145 150 140 135 =INTERCEPT(C4:C15,B4:B15) =SLOPE(C4:C15,B4:B15) per unit 21 2) 23 Component cost 24 Supplies 25 Assembly labor 26 Shipping 27 Total 28 Units produced and sold 29 Variable Cost per unit = 100,500/150 Variable Cost 71000 2500 25000 2000 =SUM(B23:326) 150 =B27/B28 Rent Supervisory salary Electricity Telephone Gas Advertising Administrative costs Total Fixed Cost 2300 5600 350 280 300 2600 15000 =SUM(D23:D29) 31 Using account analysis 32 Fixed Cost 33 Variable Cost per Unit =D30 =B29 per unit