Mikhail Frames Company, which manufactures ornate frames for original art work, began operations in January 2014. Edwin
Question:
Required
a. To understand the departments cost behavior, you decide to plot the points on graph paper and sketch a total cost line.
(1) Enter the number of units and their costs in increasing order.
(2) Plot the points on the graph.
(3) Sketch a graph so the line splits all of the points (half of the points appear above and half appear below the line).
(4) Using the line you just sketched, visually estimate the total cost to produce 4,000 units.
b. Using the high-low method, compute the total cost equation for the preceding data.
(1) Compute the variable cost per unit.
(2) Compute total fixed costs.
(3) Sketch a line between the high and low points on your graph.
(4) Using the high-low method, estimate the total cost to produce 4,000 units.
c. Name a third method that could be used to determine the fixed and variable cost estimate and comment on the advantages of your suggestedapproach.
Step by Step Answer:
Fundamental Managerial Accounting Concepts
ISBN: 978-0078025655
7th edition
Authors: Thomas Edmonds, Christopher Edmonds, Bor Yi Tsay, Philip Old