Question

Refer to your solutions for Leslie’s Sporting Goods in PA5-2.


Required:
1. Consider the pattern of Leslie’s activity and costs throughout the year. Would you consider this to be a seasonal business? Explain your answer and how this information could impact the relative proportion of fixed and variable costs for the store’s business.
2. Using the cost estimates obtained with the high-low and regression methods, predict the store’s operating costs for the upcoming months based on the following expected sales levels:
Month ...... Expected Number of Jerseys
January ...... 240
February .... 180
March ...... 300
April ...... 590
May ....... 710
June ....... 660

3. Explain why there are differences between cost predictions based on the high-low method and least-squares regression. Which do you think is more accurate? Why?
4. Using the regression results, prepare contribution margin income statements for January through June. Assume that the average sales price is $18 per jersey.
5. Based on the regression equation, what is Leslie’s expected fixed cost per month? What would Leslie expect total annual fixed cost tobe?


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  • CreatedFebruary 27, 2015
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