High Low Method Costs for McDonalds
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1) Below is the following data on McDonald's restaurants and related labor costs. Perform an analysis using the high low method and develop a cost equation.
Mc Donald' s Store Labor Costs Sales $'s
1 423,529 $1,323,527
2 537,218 $1,790,729
3 336,000 $ 840,000
4 427,275 $1,424,250
2) Assume the following based on the cost equation you developed for the above information. What is the predicted labor cost for the following sales volumes -
Sales Labor Costs
1,200,000
950,000
1,100,000
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Solution Summary
The solution explains the use of high low method to develop the cost function.
Solution Preview
1.
In the high low method, we take the highest and the lowest value to get the variable and the fixed cost
High is - Cost 537,218 and Sales 1,790,729
Low is - Cost 336,000 and Sales 840,000
We then ...
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