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Davis Stores sells clothing in 15 stores located around the southwestern United States. The managers...

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Accounting

Davis Stores sells clothing in 15 stores located around the southwestern United States. The managers at Davis are considering expanding by opening new stores and are interested in estimating costs in potential new locations. They believe that costs are driven in large part by store volume measured by revenue. The following data were collected from last years operations (revenues and costs in thousands of dollars).

Store Revenues Costs
101 $4,190 $4,349
102 2,317 3,074
103 5,873 5,316
104 4,162 4,223
105 3,049 3,946
106 4,203 3,634
107 6,984 5,164
108 1,914 2,824
109 5,866 5,048
110 3,498 3,229
111 4,066 4,404
112 4,915 3,380
113 3,642 2,826
114 5,177 4,835
115 2,574 3,121

Required

a. Use the high-low method to estimate the fixed and variable portions of store costs based on revenues.

b. Managers estimate that one of the proposed stores will have revenues of $3.4 million. What are the estimated monthly overhead costs, assuming no inflation?

c. Managers are also considering a mega-store with revenues of $19 million. What are the estimated monthly overhead costs, assuming no inflation?

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