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 June3,000$40,000July1,500$28,000August4,000$65,000September2,800$39,000October2,300$32,000November1,000$20,000December2,000$30,000Requirements; a) Using the “line of best fit”, determine Stern’s fixed cost per month and the variable cost per sales orderb) In view of Stern’s cost behavior pattern, which of the two methods appear more appropriate? Explain your answer.

In cost accounting, while calculating fixed and variable costs, the following equation is to be…

Answered: John Stern operates a retail store. The…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter18: Pricing And Profitability Analysis

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Problem 3CE: Pattison Products, Inc., began operations in October and manufactured 40,000 units during the month...

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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

Requirements;

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

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

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