Luisa Crimini has been operating a beauty shop in a college town for the past 10 years. Recently, Luisa rented space next to her shop and opened a tanning salon. She anticipated that the costs for the tanning service would primarily be fixed, but found that tanning salon costs increased with the number of appointments. Costs for this service over the past 8 months are as follows: Month Tanning Appointments Total Cost January 1,600 $1,754 February 2,000 2,140 March 3,500 2,790 April 2,500 2,400 May 1,500 1,790 June 2,300 2,275 July 2,150 2,200 August 3,000 2,640 Required: 1. Which month represents the high point? The low point? High point Low point 2. Using the high-low method, compute the variable rate for tanning. Compute the fixed cost per month. Round the variable rate per tanning appointment to the nearest cent. Variable rate for tanning $ per tanning appointment Fixed cost per month $ 3. Using the variable rate and fixed cost, what is the cost formula for tanning services?
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
High-Low Method
Luisa Crimini has been operating a beauty shop in a college town for the past 10 years. Recently, Luisa rented space next to her shop and opened a tanning salon. She anticipated that the costs for the tanning service would primarily be fixed, but found that tanning salon costs increased with the number of appointments. Costs for this service over the past 8 months are as follows:
| Month | Tanning Appointments |
Total Cost | |||
| January | 1,600 | $1,754 | |||
| February | 2,000 | 2,140 | |||
| March | 3,500 | 2,790 | |||
| April | 2,500 | 2,400 | |||
| May | 1,500 | 1,790 | |||
| June | 2,300 | 2,275 | |||
| July | 2,150 | 2,200 | |||
| August | 3,000 | 2,640 |
Required:
1. Which month represents the high point? The low point?
| High point | |
| Low point |
2. Using the high-low method, compute the variable rate for tanning. Compute the fixed cost per month. Round the variable rate per tanning appointment to the nearest cent.
| Variable rate for tanning | $ per tanning appointment |
| Fixed cost per month | $ |
3. Using the variable rate and fixed cost, what is the cost formula for tanning services?
4. Calculate the total predicted cost of tanning services for September for 2,500 appointments using the formula found in Requirement 3. Of that total cost, how much is the total fixed cost for September? How much is the total predicted variable cost for September? In your calculations, round variable cost per unit to the nearest cent. If required, round the final answers to the nearest dollar.
| Total predicted cost for September | $ |
| Total fixed cost for September | $ |
| Total predicted variable cost for September | $ |
5. Which of the following statements is correct when luisa uses the high-low method to estimate the costs?
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