Answered: John Stern operates a retail store. The…

Excel Applications for Accounting Principles

4th Edition

ISBN:9781111581565

Author:Gaylord N. Smith

Publisher:Gaylord N. Smith

Chapter7: Inventory Cost Flow Assumptions (fifolifo)

Section: Chapter Questions

Problem 9R: Click the Chart sheet tab. On the screen is a column chart showing ending inventory costs. During a...

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John Stern operates a retail store. The business is studying order processing costs behavior and has gathered the following data for a recent seven-month period.

Month	Sales Order	Order Processing Costs
June	3,000	$40,000
July	1,500	$28,000
August	4,000	$65,000
September	2,800	$39,000
October	2,300	$32,000
November	1,000	$20,000
December	2,000	$30,000

Determine the variable cost per sales order and the fixed cost using the high-low method.

What is the equation of the total mixed cost function?

Prepare the scatter gram, clearly showing any outliers.

Using the “line of best fit”, determine Stern’s fixed cost per month and the variable cost per sales order

In view of Stern’s cost behavior pattern, which of the two methods appear more appropriate? Explain your answer.

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