The controller at Speedy Delivery wants to break-out the cost of deliveries into fixed and variable components so that they will be better able to predict costs for next year. Below are the delivery cost incurred each month and the number of deliveries.
Required: Using the high-low method:
1.) Calculate the fixed cost of overhead.
2.) Calculate the variable rate per labor hour.
3.) Construct the cost formula for total overhead cost.
4.) The company is estimating that in January the number of deliveries will be 125. How much should they estimate to have in total delivery costs for January?
Definitions:
Equipment Sale
The process or transaction that involves selling machinery or technical gear used in manufacturing or operation.
Operating Activity
Business actions that relate directly to the production and delivery of goods and services, impacting the operating income.
Dividends Paid
The portion of a company's earnings distributed to shareholders as a payment.
Free Cash Flow
The amount of cash generated by a company after accounting for operating expenses and capital expenditures.
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