Maintenance Equipment, Inc., would like to estimate costs associated with its sales personnel. Salespeople are paid a
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Question:
Maintenance Equipment, Inc., would like to estimate costs associated with its sales personnel. Salespeople are paid a salary plus a commission. Commission rates vary among products and are based on sales dollars. The company reported the following monthly cost data related to sales personnel:
Reporting Period (Month) | Total Costs | Sales Amount |
January | $710,000 | $13,800,000 |
February | 695,000 | 13,600,000 |
March | 765,000 | 15,100,000 |
April | 650,000 | 12,000,000 |
May | 775,000 | 15,500,000 |
June | 750,000 | 14,700,000 |
July | 715,000 | 14,500,000 |
August | 680,000 | 13,100,000 |
September | 830,000 | 16,500,000 |
October | 815,000 | 16,000,000 |
November | 800,000 | 15,600,000 |
December | 690,000 | 13,200,000 |
- Required:
- Use the four steps of the high-low method to estimate the total fixed cost per month and the variable cost per sales dollar. State your results in the cost equation form Y = f + vX by filling in the dollar amounts for f and v.
- What would Maintenance Equipment’s estimated costs be if it had sales of $12,500,000 next month?
- What would Maintenance Equipment’s estimated costs be if it had sales of $20,000,000 next month? Why should you feel uncomfortable estimating costs for $20,000,000 in sales?
Related Book For
Accounting for Decision Making and Control
ISBN: 978-0078025747
8th edition
Authors: Jerold Zimmerman
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