FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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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
AppointmentsTotal 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 $fill in the blank 3 per tanning appointment Fixed cost per month $fill in the blank 4 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 $fill in the blank 6 Total fixed cost for September $fill in the blank 7 Total predicted variable cost for September $fill in the blank 8 5. Which of the following statements is correct when luisa uses the high-low method to estimate the costs?
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