You own Lettuce Turnip the Beet, Inc., a vegetarian catering company. You have been hired by a local nonprofit to provide food for an upcoming fundraising event to promote community recycling. The nonprofit expects 100 people to attend the fundraising event. You have asked one of your staff members to estimate the cost of the event using the following information from three previous catering engagements: Engagement 1 Engagement 2 Engagement 3 Total cost of event $1,890 $1,785 $2,100 Cost per person $21 $17 $15 The staff member decides to use the high low method to predict costs and estimates that with 100 people in attendance, the total estimated costs will be $1,848. You are unsure of how the staff member came up with the estimate, so you ask the staff member to explain how they calculated the total estimated costs. This is what they emailed to you: I defined "x" as the number of people in attendance and calculated the number of people who attended each engagement by dividing the total cost of the engagement by the cost per person. Engagement 1 had the lowest number of people in attendance, 90 people, and Engagement 3 had the highest number of people in attendance, 140 people. I then paired the high and low "x" with the high and low total cost of the event. Engagment 2 had the lowest total cost of $1,785, and Engagement 3 has the highest total cost of $2,100. Using (90, $1,785) and (140,$2,100) as my two data points, I calculated a variable cost per person of $6.30. Using the variable cost per person and the first data point, (90, $1,785), I calculated total fixed costs of $1,218. I then multiplied 100 people by $6.30 per person and added $1,218 to arrive at the total expected costs for the event of $1,848. Where did the staff member go wrong? A. They did not state the variable rate in its constant form. B. They incorrectly defined the independent variable. C. They failed to convert the monthly fixed costs to annual fixed costs. D. They incorrectly assumed the fixed costs remained constant in total. E. They failed to pair the lowest x with the correct y.

You own Lettuce Turnip the Beet, Inc., a vegetarian catering company. You have been hired by a local nonprofit to provide food for an upcoming fundraising event to promote community recycling. The nonprofit expects 100 people to attend the fundraising event. You have asked one of your staff members to estimate the cost of the event using the following information from three previous catering engagements: Engagement 1 Engagement 2 Engagement 3 Total cost of event $1,890 $1,785 $2,100 Cost per person $21 $17 $15 The staff member decides to use the high low method to predict costs and estimates that with 100 people in attendance, the total estimated costs will be $1,848. You are unsure of how the staff member came up with the estimate, so you ask the staff member to explain how they calculated the total estimated costs. This is what they emailed to you: I defined "x" as the number of people in attendance and calculated the number of people who attended each engagement by dividing the total cost of the engagement by the cost per person. Engagement 1 had the lowest number of people in attendance, 90 people, and Engagement 3 had the highest number of people in attendance, 140 people. I then paired the high and low "x" with the high and low total cost of the event. Engagment 2 had the lowest total cost of $1,785, and Engagement 3 has the highest total cost of $2,100. Using (90, $1,785) and (140,$2,100) as my two data points, I calculated a variable cost per person of $6.30. Using the variable cost per person and the first data point, (90, $1,785), I calculated total fixed costs of $1,218. I then multiplied 100 people by $6.30 per person and added $1,218 to arrive at the total expected costs for the event of $1,848. Where did the staff member go wrong? A. They did not state the variable rate in its constant form. B. They incorrectly defined the independent variable. C. They failed to convert the monthly fixed costs to annual fixed costs. D. They incorrectly assumed the fixed costs remained constant in total. E. They failed to pair the lowest x with the correct y.

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter1: Introduction To Managerial Accounting

Section: Chapter Questions

Problem 15E: Ethical Behavior Consider the following scenario between Dave, a printer, and Steve, an assistant in...

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	Engagement 1	Engagement 2	Engagement 3
Total cost of event	$1,890	$1,785	$2,100
Cost per person	$21	$17	$15

The staff member decides to use the high low method to predict costs and estimates that with 100 people in attendance, the total estimated costs will be $1,848. You are unsure of how the staff member came up with the estimate, so you ask the staff member to explain how they calculated the total estimated costs. This is what they emailed to you:

I defined "x" as the number of people in attendance and calculated the number of people who attended each engagement by dividing the total cost of the engagement by the cost per person. Engagement 1 had the lowest number of people in attendance, 90 people, and Engagement 3 had the highest number of people in attendance, 140 people. I then paired the high and low "x" with the high and low total cost of the event. Engagment 2 had the lowest total cost of $1,785, and Engagement 3 has the highest total cost of $2,100. Using (90, $1,785) and (140,$2,100) as my two data points, I calculated a variable cost per person of $6.30. Using the variable cost per person and the first data point, (90, $1,785), I calculated total fixed costs of $1,218. I then multiplied 100 people by $6.30 per person and added $1,218 to arrive at the total expected costs for the event of $1,848.

Where did the staff member go wrong?

They did not state the variable rate in its constant form.

They incorrectly defined the independent variable.

They failed to convert the monthly fixed costs to annual fixed costs.

They incorrectly assumed the fixed costs remained constant in total.

They failed to pair the lowest x with the correct y.

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