1. Estimating Fixed and Variable Cost Per Unit Using Regression

The management of Rutledge Corporation would like to better understand the behavior of the

company's warranty costs. Those costs are listed below for a number of recent months:

		Product Returns	Warranty Cost
	March.....................	30	$3,648
	April.......................	37	$4,074
	May........................	43	$4,460
	June........................	41	$4,330
	July.........................	32	$3,756
	August....................	48	$4,782
	September..............	35	$3,932
	October..................	33	$3,823

Management believes that warranty cost is a mixed cost that depends on the number of product returns.

Required: Estimate the variable cost per product return and the fixed cost per month using the least-squares regression method.

2. Traditional and Contribution Income Statements

Novakovich Inc., a manufacturing company, has provided the following financial data for January:

	Sales......................................................	$430,000
	Variable production expense................	$84,000
	Variable selling expense.......................	$16,000
	Variable administrative expense...........	$28,000
	Fixed production expense.....................	$102,000
	Fixed selling expense............................	$44,000
	Fixed administrative expense...............	$121,000

The company had no beginning or ending inventories.

Required:

a. Prepare an income statement in good form for January using the traditional approach.

b. Prepare an income statement in good form for January using the contribution approach.

3. Estimating Fixed and Variable Costs Using High-Low Method

The management of Dethlefsen Corporation would like to have a better understanding of the behavior of its inspection costs. The company has provided the following data:

		Direct Labor-Hours	Inspection Cost
	January..................	5,089	$33,122
	February................	5,042	$32,929
	March....................	5,026	$32,870
	April......................	5,073	$33,065
	May.......................	5,029	$32,906
	June.......................	5,040	$32,913
	July........................	5,070	$33,050
	August...................	5,027	$32,875
	September..............	4,995	$32,746

Management believes that inspection cost is a mixed cost that depends on direct labor-hours.

Required: Estimate the variable cost per direct labor-hour and the fixed cost per month using the high-low method. Show your work!