Following are sales and administrative cost data for Big Jack Burgers for the last four months:

Administrative cost is a mixed cost, and sale is a potential cost driver.

A. Using the high-low method, create a cost function for administrative costs.
B. In your own words, explain why the high-low method might not be a good method for estimating the cost function.
C. Create a scatter plot and add a trend line. After examining the plot, use your judgment to determine whether the cost is fixed, variable, or mixed.
D. Perform regression analysis to create a cost function for administrative costs.
E. Can we know for certain that the cost function from part (D) provides a good estimate for next month’s administrative costs? Why or why not?
F. Discuss whether sales are an economically plausible driver for administration costs for Big

  • CreatedJanuary 26, 2015
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