Oriole Flower Cart incurred the following monthly costs. Using the form y = mx +

Question

Oriole Flower Cart incurred the following monthly costs.

Using the form y = mx + b, estimate the cost formula for each cost incurred by Oriole Flower Cart. (Round unit cost to 2 decimal places, e.g. 52.75. If the cost equation has no variable component enter 0 for the amount.)

Bouquets Sold 5,000 7,500 10,000 Balloons (14 per bouquet) $ 12,220 $ 15,172 $ 18,122 Insurance $ 5,000 $ 5,000 $ 5,000 Delivery $ 5,904 $ 8,127 $ 10,327 Employee compensation $ 12,850 $ 14,072 $ 15,297 Advertising $ 1,500 $ 1,500 $ 1,500

Explanation / Answer

Cost formula for Ballons Variable Ballon cost per Bouquet = (15172-12220)/(7500-5000) = 2,952/2,500 = 1.18 Total variable at 5000 Bouquets = 5,000 X 1.18 =5,900 Fixed cost = 12,220 - 5,900 = 6,320 Cost formula for Ballons Y = 1.18 X+ 6320 Cost formula for Insurance Y = 0 X+ 5000 Cost formula for Delivery Variable Delivery cost per Bouquet = (8127-5904)/(7500-5000) = 2,223/2,500 = 0.89 Total variable at 5000 Bouquets = 5,000 X 0.89 =4,450 Fixed cost = 5,904 - 4,450 = 1,454 Cost formula for Delivery Y =0.89 X+ 1454 Cost formula for Empolyee Compensation Variable Employee Compensation cost per Bouquet = (14072-12850)/(7500-5000) = 1,222/2,500 = 0.49 Total variable at 5000 Bouquets = 5,000 X 0.49 =2,450 Fixed cost = 12,850 - 2,450 = 1,454 Cost formula for Employee Compensation Y = 0.49 X+ 1,454 Cost formula for Advertising Y = 0 X+ 1,500

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