Cost estimation
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SomethingNew is a small one-person company that provides elaborate and imaginative wedding cakes to order for very large wedding receptions. The owner of the company would like to understand the cost structure of the company and has compiled the following records of activity and costs incurred. The owner believes that the number of weddings catered is the best measure of activity.
Month
Weddings
Costs Incurred
January
3
$3,800
February
2
$3,600
March
6
$4,000
April
9
$4,300
May
12
$4,500
June
20
$5,200
Required:
a. Using the high-low method, estimate the variable cost per wedding and the total fixed cost per month. (Round off the variable cost per wedding to the nearest cent and the total fixed cost to the nearest dollar.)
b. Using the least-squares regression method, estimate the variable cost per wedding and the total fixed cost per month. (Round off the variable cost per wedding to the nearest cent and the total fixed cost to the nearest dollar.)
c. What would be the estimated costs if the company anticipates catering 18 weddings in July?
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Solution Summary
Excel file shows cost estimation using high-low method and the least-squares regression method.
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