The Stephens Leadership Center provides training seminars in personal development and time management. The company is relatively new and management is seeking information regarding the Center's cost structure. The following information has been gathered since the inception of the business in January of the current year:??Seminars OfferedCosts Incurred?January10$17,000?February12$18,800?March15$20,900?April18$23,762?May16$21,800?June13$19,400Required:a. Using the high-low method, estimate the variable cost per seminar and the total fixed cost per month.b. Using the least-squares method, estimate the variable cost per seminar and the total fixed cost per month.
What will be an ideal response?
a. High-Low Method:
| ? | ? | Seminars Offered | Cost Incurred |
| ? | High activity level (April) | 18 | $23,762 |
| ? | Low activity level (January) | 10 | $17,000 |
| ? | Change | 8 | $6,762 |
Variable cost = Change in Cost/Change in activity
Variable cost = $6,762 ÷ 8 seminars = $845.25 per seminar
Fixed cost = Total cost ? Variable cost
Fixed cost = $23,762 ? ($845.25 per seminar × 18 seminars) = $8,547.50
Y = $8,547.50 + $845.25X
b. Least-Squares Method:
Using Microsoft Excel functions, the estimates are:
Variable cost per seminar = Slope = $8,761
Total fixed cost per month = Intercept = $822.57
Y = $8,761 + $822.57X
Microsoft Excel.
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