Homework Clinic

Social Science Clinic => Accounting => Topic started by: pane00 on Jan 5, 2020

Title: Stella Services has a customer website to take orders, answer customer questions, and address ...
Post by: pane00 on Jan 5, 2020

Stella Services has a customer website to take orders, answer customer questions, and address customer complaints.  The costs associated with this customer website over the past six months are listed below:

Month	Customer website costs	Number of website hits
January	$15,000	9,000
February	$15,400	9,200
March	$16,000	10,200
April	$15,950	9,700
May	$14,500	8,200
June	$14,800	8,800

Management at Stella Services believes that the customer website costs are a mixed cost and would like to use the high-low method to estimate their future costs using the number of website hits in any given month as the cost driver.

Required:

1.	Using the high-low method, estimate the variable cost per website hit and the monthly fixed

costs associated with the customer website.

2.	Write the cost equation for estimating the customer website expenses for Stella Services using

the results from Requirement 1.

3.	If Stella Services expects 9,500 website hits for July, what are their anticipated customer website

costs for July?

Title: Stella Services has a customer website to take orders, answer customer questions, and address ...
Post by: cassie_ragen on Jan 5, 2020

Part 1	​
High cost	$16,000
Low cost	$(14,500)
Change in cost	$1,500
​	​
High activity	10,200
Low activity	(8,200)
Change in activity	2,000
​	​
Change in cost	$1,500
Divide by	Divide by
Change in activity	2,000
Variable cost per call	$0.75
​	​
Now, using high point data:	​
Total variable cost at high point:	​
High activity	10,200
Variable cost per call	$0.75
Total variable cost at high point	$7,650
​	​
Total cost at high point	$16,000
Less total variable cost at high point	$(7,650)
Fixed cost	$8,350
​	​
Part 2 y = $0.75x + $8,350	​
​	​

Part 3	​
Total cost at new volume:	​
Anticipated number of calls	9,500
Variable cost per call	$0.75
Total variable cost at new volume	$7,125
Fixed cost	$8,350
Monthly operating cost at new volume	$15,475

Title: Re: Stella Services has a customer website to take orders, answer customer questions, and address ..
Post by: Sandip Girnara on Apr 2, 2022

Thank You