(Appendix 2A)CPE for CPAs, Inc. , provides continuing professional education for certified public accountants.The company is relatively new and management is seeking information regarding the company's cost structure.The following information has been gathered for the first six months of the current year: Required:
a.Using the high-low method, estimate the variable cost per seminar and the total fixed cost per month.
b.Using the least-squares regression method, estimate the variable cost per seminar and the total fixed cost per month.

Question

(Appendix 2A)CPE for CPAs, Inc. , provides continuing professional education for certified public accountants.The company is relatively new and management is seeking information regarding the company's cost structure.The following information has been gathered for the first six months of the current year:

Required:
a.Using the high-low method, estimate the variable cost per seminar and the total fixed cost per month.
b.Using the least-squares regression method, estimate the variable cost per seminar and the total fixed cost per month.

Quizplus · Accepted Answer

The Answer is a.High-Low Method

a.High-Low Method Variable cost = Change in cost ÷ Change in activity Variable cost = $6, 600 ÷ 8 seminars = $825 per seminar Fixed cost = Total cost - Variable cost Fixed cost = $21, 800 - (16 seminars × $825 per seminar)= $8, 600 Y = $8, 600 + $825X b.Least-squares regression method Using Microsoft Excel functions, the estimates are: Variable cost per seminar = Slope = $9, 000 Total fixed cost per month = Intercept = $800 Y = $9, 000 + $800X

Variable cost = Change in cost ÷ Change in activity
Variable cost = $6, 600 ÷ 8 seminars = $825 per seminar
Fixed cost = Total cost - Variable cost
Fixed cost = $21, 800 - (16 seminars × $825 per seminar)= $8, 600
Y = $8, 600 + $825X
b.Least-squares regression method
Using Microsoft Excel functions, the estimates are:
Variable cost per seminar = Slope = $9, 000
Total fixed cost per month = Intercept = $800
Y = $9, 000 + $800X