Chapter_3_Assignment_Solution

Chapter_3_Assignment_Solution - Chapter 3 Assignment...

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Solution PROBLEM I: Lewis Corporation plans to increase its advertising budget by 20% next year. The company currently spends $15,000 on advertising costs. In addition to advertising, Lewis spends $50,000 per year for other fixed costs and $15 per unit for variable costs. Required : If Lewis anticipates producing 25,000 units next year, what will be next year’s estimated total costs? Answer: $_ 443,000 ______ Total Costs = Fixed Costs + Variable Cost per Unit (x) Total Costs = $68,000 * + $15 (25,000) * FC = [15,000 + .20(15,000)] + $50,000 = $68,000 PROBLEM II : Reliable Movers Inc. documented the miles driven and total moving van costs for the past five months as follows: Number of Miles Total Vehicle Costs January 3,000 $ 4,800 February 3,500 5,200 March 5,000 6,100 April 4,000 5,000 May 5,400 6,000 A. Which two months exhibit the high and low activity levels? High: ___ May __________ _ Low: ___ Jan ___________ B. Using the high/low method, what is the variable cost per mile?
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Chapter_3_Assignment_Solution - Chapter 3 Assignment...

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