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

Assume a Papa John's restaurant has the following information available regarding costs at representative levels of monthly sales:

Monthly sales in units$5,0008,00010,000$Cost of food sold$$15,000$$$24,000$$$30,000$Wages and fringe benefits$4,3504,5604,700$Fees paid delivery help$1,3002,0802,600$Rent on building$1,3001,3001,300$Depreciation on equipment$400400400$Utilities$750840900$Supplies $($soap$,$ floor wax, etc.$)150180200$Administrative costs$1,5001,5001,500$Total$$24,750$$$34,860$$$41,600$

$$

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

Cost of food soldVariableFixedMixedWages and fringe benefitsVariableFixedMixedFees paid delivery helpVariableFixedMixedRent on buildingVariableFixedMixedDepreciation on equipmentVariableFixedMixedUtilitiesVariableFixedMixedSupplies $($soap$,$ floor wax, etc.$)$VariableFixedMixedAdministrative costsVariableFixedMixed

$($b$)$ Use the high$-$low method to develop a schedule identifying the amount of each cost that is fixed per month 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 soldXWages and fringe benefitsXFees paid delivery helpXRent on buildingXDepreciation on equipmentXUtilitiesXSupplies $($soap$,$ floor wax, etc.$)$XAdministrative costsXTotal costs equationX

$$

$($c$)$ Predict total costs for a monthly sales volume of $9,900$ units.