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Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773

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BuyFindarrow_forward

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773
Textbook Problem
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Using High-Low to Calculate Predicted Total Variable Cost and Total Cost for Budgeted Output

Refer to the information for Speedy Pete’s above. Assume that this information was used to construct the following formula for monthly delivery cost.

Total Delivery Cost =  $ 41 , 850 + ( $ 12.00 × Number of Deliveries)

Required:

Assume that 3,000 deliveries are budgeted for the following month of January. Use the total delivery cost formula for the following calculations:

  1. 1. Calculate total variable delivery cost for January.
  2. 2. Calculate total delivery cost for January.

1.

To determine

Compute the value of total variable delivery costs for the month of January.

Explanation

Variable Cost:

Variable cost is the cost which varies due to the changes in the level of output to produce products and services in a relevant range.

Use the following formula to calculate total variable delivery costs for the month of January:

Total Variable Delivery Costs=Variable Rate×Employee Hours

Substitute $12 for variable rate and 3,000 hours for employee hours in the above formula

2.

To determine

Compute the value of total delivery costs for the month of January.

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