Answered: I have found the variable portion…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter16: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 14E: Sports-Reps, Inc., represents professional athletes and movie and television stars. The agency had...

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Question

I have found the variable portion (51.9%) but don't understand how to get the fixed portion in dollars.

Davis Stores sells clothing in 15 stores located around the southwestern United States. The managers at Davis are considering expanding by opening new stores and are interested in estimating costs in potential new locations. They believe that costs are driven in large part by store volume measured by revenue. The following data were collected from last year’s operations (revenues and costs in thousands of dollars).

Store	Revenues	Costs
101	$4,100	$4,214
102	2,227	2,894
103	5,738	5,181
104	3,982	3,998
105	2,914	3,676
106	4,023	3,319
107	6,894	5,029
108	1,779	2,374
109	5,416	4,688
110	3,228	2,959
111	3,886	4,179
112	4,690	3,200
113	3,552	2,556
114	4,817	4,655
115	2,124	2,986

Required:

a. Use the high-low method to estimate the fixed and variable portions of store costs based on revenues. (Round variable cost percentage answer to 1 decimal place. Enter Fixed cost answer in thousands of dollars.)

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