Question 1

E5-24 (Static) Estimating Cost Behavior Using Least-Squares Regression and High-Low Method [LO 5-3, 5-4]

Tempe Office Services and Supplies (TOSS) provides various products and services in the Tempe Research Park, home to numerous high-tech and bio-tech companies. Making color copies is one of its most popular and profitable services. The controller performed a regression analysis of data from the Color Copy Department with the following results:

Intercept	238.69
R-squared	0.968
Number of observations	6
Xcoefficient	0.069

The regression output was based on the following data:

Month	Number of Color Copies	Color Copy Department Costs
July	17,000	$ 1,445
August	21,250	1,658
September	22,950	1,785
October	18,700	1,530
November	20,400	1,615
December	25,500	2,040

Required:

1.What is the variable cost per color copy for TOSS?

2.What is the fixed cost for the Color Copy Department?

3.Based on the regression output obtained by the controller, what cost formula should be used to estimate future total costs for the Color Copy Department? Enter answer as an equation in the form ofy= a + bx.

5-a.Use the high-low method to estimate the variable and fixed costs for the Color Copy Department.

5-b.What cost formula should be used based on analysis?Enter answer as an equation in the form ofy= a + bx.

6.If 22,100 copies are made during January, what is the total cost predicted by each method?

Req 1

What is the variable cost per color copy for TOSS? Note: Enter answer in cents, rounded to three decimalplaces.

Variable cost

per color copy (in cents)

Req 2

What is the fixed cost for the Color Copy Department? Note:Round answer to two decimal places.

Fixed cost

per month

Req 3

Based on the regression output obtained by the controller, what cost formula should be used to estimate future total costs for the Color Copy Department? Enter answer as an equation in the form ofy= a + bx. Note:Round fixed costs to two decimal places and variable cost per unit to three decimal places.

Total cost =

+

(Number of color copies)

Req 5A

Use the high-low method to estimate the variable and fixed costs for the Color Copy Department. Note:Round intermediate calculations and variable cost per unit to two decimal places.

Variable cost per color copy
Fixed cost

Req 5B

What cost formula should be used based on analysis?Enter answer as an equation in the form ofy= a + bx. Note:Round intermediate calculations and final answers to two decimal places.

Total cost =

+

(Number of color copies)

Req 6

If 22,100 copies are made during January, what is the total cost predicted by each method? Note:Use the answers that provided in parts three and five-b and round final answers to two decimal places.

	Total Cost
Regression
High-Low