# Question

Refer to the information for Luisa Crimini above.

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 eight months are as follows:

Required:

1. Which month represents the high point? The low point?

2. Using the high-low method, compute the variable rate for tanning. Compute the fixed cost per month.

3. Using your answers to Requirement 2, write 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?

5. 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 tanningsal on.

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 eight months are as follows:

Required:

1. Which month represents the high point? The low point?

2. Using the high-low method, compute the variable rate for tanning. Compute the fixed cost per month.

3. Using your answers to Requirement 2, write 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?

5. 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 tanningsal on.

## Answer to relevant Questions

Refer to the information for Luisa Crimini above. 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 ...Refer to the company information in Exercise 14-35. In exercise The method of least squares was used to develop a cost equation to predict the cost of receiving. Ninety-six data points from monthly data were used for the ...Classify each of the following costs for a jeans manufacturing company as a variable cost, committed fixed cost, or discretionary fixed cost. a. The cost of buttons b. The cost to lease warehouse space for completed ...The management of Wheeler Company has decided to develop cost formulas for its major overhead activities. Wheeler uses a highly automated manufacturing process, and power costs are a significant manufacturing cost. Cost ...Suppose a firm with a contribution margin ratio of 0.3 increased its advertising expenses by $10,000 and found that sales increased by $30,000. Was it a good decision to increase advertising expenses? Suppose that the ...Post your question

0