CH 14 IN-CLASS EXERCISES - 5-21-14.xlsx - Homework due today Quiz 1 Monday June 2 Ethics paper due on Thu June 12 S.I Sessions Resume Article No class

# CH 14 IN-CLASS EXERCISES - 5-21-14.xlsx - Homework due...

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Homework due today Quiz 1 - Monday, June 2 Ethics paper due on Thu - June 12 S.I. Sessions Resume Article No class next Monday - holiday Chapter 14 Vocabulary: 1. Cost driver 2. Types of costs: Variable Mixed (or "Step") Fixed 3. Two types of fixed costs: Discretionary Fixed Cost Committed Fixed Cost 4. From Monday: Expense Period cost Asset Capitalized cost Direct cost Indirect cost Overhead Mixed costs -- how do we handle those? The High-Low Method This is a formula/technique used to separate mixed costs into the Variable and Fixed components So for the first time today -- we're going to build a model to help us run our business The model will be a formula that calulates total utility costs based on BB muffin production. In order to use this technique, we need to get some historical data Following is data for our blueberry muffin factory: Month Utility Cost Muffins baked (in dozens) January 7,000 360 February 8,140 550 March 9,899 630 April 9,787 610 May 8,490 480 June 7,450 350 July 9,490 570 August 7,531 310 Overall: we're going to analyze this data and try to figure out, based on the maximum and minimum, the estimated minimum amount of utilities (ie - how much is fixed and how much depends on production) 1 - Create a formula for total costs 2 - What are expected variable and total utility costs for September if we expect to produce 575 dozen muffins? Dollars Units High 9,899 630 Low 7,531 310 Step 2 - calculate the difference between the high and low units and dollars Dollars Units High 9,899 630 Low 7,531 310 2,368 320 [Note: there's a term for these ranges: RELEVANT RANGE] Step 3 - calculate the variable cost-per-unit (divide the dollar difference by the units difference) Dollar difference 2,368 Units difference 320 Variable cost-per-unit 7.40 Step 4 - calcuate the FIXED cost

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