Reference no: EM132717949
Question: Laser It, Inc., provides Laser Liposuction surgery for its patients. You are the accountant for Laser It, and management has asked you to devise a way of accurately estimating company costs for planning and decision-making purposes. You believe that reviewing historical data for costs and number of surgeries is the best starting point. These data are as follows:
Reporting Period (Month)Total Costs / Number of Surgeries
January $209,000 /54
February 206,000 /52
March 217,000 /55
April 200,000 /50
May 233,000 /62
June 229,000 /60
July 225,000 /57
August 234,000 /63
September 252,000 /71
October 251,000 /70
November 246,000 /66
December 245,000 /65
Required: - Use the four steps of the high-low method to estimate total fixed costs per month, and the variable cost per surgery. State your results in the cost equation form Y = f + vX by filling in the dollar amounts for f and v.
- Use the five steps of the scattergraph method to estimate total fixed costs per month, and the variable cost per surgery. State your results in the cost equation form Y = f + vX by filling in the dollar amounts for f and v.
- Use the results of the high-low method (a) and scattergraph method (b) to estimate costs for 70 surgeries. (You will have two different answers-one for each method.) Which approach do you think is most accurate and why?
- Assume Laser It charges $4,000 for each surgery performed. Use the high-low cost information (for 70 surgeries) to make a contribution margin income statement. (Hint: You will only have one line item for variable costs and one line item for fixed costs.)