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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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High-Low Method

Refer to the information for Luisa Crimini above.

Required:

  1. 1. Which month represents the high point? The low point?
  2. 2. Using the high-low method, compute the variable rate for tanning. Compute the fixed cost per month.
  3. 3. Using your answers to Requirement 2, write the cost formula for tanning services.
  4. 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?
  5. 5. CONCEPTUAL CONNECTION Identify and briefly explain any additional issues that Luisa might be wise to consider when using the high-low method to estimate the costs of her tanning salon.

1.

To determine

Identify the month which represents the high point and the month which represents the low point.

Explanation

High Low Method:

The method in which, high and low points of data are used to classify the mixed cost into fixed and variable cost known as high low method...

2.

To determine

Calculate the value of variable rate for tanning with the help of high-low method. Also, calculate the value of fixed cost for tanning with the help of high-low method

3.

To determine

Prepare the cost formula for tanning services.

4.

To determine

Calculate the value of total predicted cost of tanning services, fixed cost for the month of September. Also, calculate the value of variable cost for the month of September.

5.

To determine

Discuss the additional issues that should be considered by LU at the time of using the high-low method.

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