Cost Behavior Analysis in a Restaurant: High-Low Cost Estimation
Assume a Papa John’s restaurant has the following information available regarding costs at representative levels of monthly sales:

 ? Monthly sales in units ? 5,000 8,000 10,000 Cost of food sold \$10,000 \$16,000 \$20,000 Wages and fringe benefits 4,200 4,320 4,400 Fees paid delivery help 1,200 1,920 2,400 Rent on building 1,300 1,300 1,300 Depreciation on equipment 500 500 500 Utilities 800 920 1,000 Supplies (soap, floor wax, etc.) 200 260 300 Administrative costs 1,600 1,600 1,600 Total \$19,800 \$26,820 \$31,500

?

(a) Identify each cost as being variable, fixed, or mixed.

Cost of food sold

Wages and fringe benefits

Fees paid delivery help

Rent on building

Depreciation on equipment

Utilities

Supplies (soap, floor wax, etc.)

(b) Use the high-low method to develop a schedule identifying the amount of each cost that is fixed per month or variable per unit. Total the amounts under each category to develop an equation for total monthly costs.

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(c) Predict total costs for a monthly sales volume of 9,100 units.

(a) Identify each cost as being variable, fixed, or mixed
Cost of good sold: Variable
Wages and fringe benefits: Mixed
Fees paid delivery help: Variable
Rent on building: Fixed
Depreciation on…