Sterling Boat Company makes inexpensive aluminum fishing boats. Production is seasonal, with considerable activity occurring in the spring and summer. Sales and production tend to decline in the fall and winter months. During 2019, the high point in activity occurred in June when it produced 200 boats at a total cost of $720,000. The low point in production occurred in January when it produced 100 boats at a total cost of $450,000.

Required

a. Use the high-low method to estimate the amount of fixed cost incurred each month by Sterling Boat Company.

b. Determine the total estimated cost if 150 boats are made.

c. Comment on the strengths and weaknesses of the high-low method.

d. Explain how a visual fit scatter graph could be used to improve accuracy.