Cost Behavior Analysis in a Restaurant: High$-$Low Cost Estimation

Assume a Potbelly$$s restaurant has the following information available regarding costs at representative levels of monthly sales $($meals served$)$:

Monthly sales in units$5,0007,00010,000$Cost of food sold$ $7,500$$$10,500$$$15,000$Wages and fringe benefits$5,9005,9406,000$Fees paid delivery help$6,0008,40012,000$Rent on building$3,5003,5003,500$Depreciation on equipment$850850850$Utilities$600640700$Supplies $($soap$,$ floor wax, etc.$)400480600$Administrative costs$1,2001,2001,200$Total$$25,950$$$31,510$$$39,850$

$($a$)$ Identify each cost as being variable, fixed, or mixed.

Cost of food soldAnswer $1$VariableFixedMixedWages and fringe benefitsAnswer $2$VariableFixedMixedFees paid delivery helpAnswer $3$VariableFixedMixedRent on buildingAnswer $4$VariableFixedMixedDepreciation on equipmentAnswer $5$VariableFixedMixedUtilitiesAnswer $6$VariableFixedMixedSupplies $($soap$,$ floor wax, etc.$)$Answer $7$VariableFixedMixedAdministrative costsAnswer $8$VariableFixedMixed

$($b$)$ Use the high$-$low method to develop a schedule identifying the amount of each cost that is mixed or variable per unit. Total the amounts under each category to develop an equation for total monthly costs.

Round variable cost answers to two decimal places.

Fixed CostsVariable CostsCost of food soldAnswer $9$Answer $10$XWages and fringe benefitsAnswer $11$Answer $12$XFees paid delivery helpAnswer $13$Answer $14$XRent on buildingAnswer $15$Answer $16$XDepreciation on equipmentAnswer $17$Answer $18$XUtilitiesAnswer $19$Answer $20$XSupplies $($soap$,$ floor wax, etc.$)$Answer $21$Answer $22$XAdministrative costsAnswer $23$Answer $24$XTotal costs equationAnswer $25$Answer $26$X

$*$ where X $=$ Unit sales

$($c$)$ Predict total costs for a monthly sales volume of $8,500$ units.

$Answer $27$