Sebolt Wire Company heats copper ingots to very high temperatures by placing the ingots in a large
Question:
Required:
1. Using the high-low method, estimate a cost formula for power cost. Express the formula in the form Y 5 a 1 bX.
2. Prepare a scattergraph by plotting ingots processed and power cost on a graph. Draw a straight line though the two data points that correspond to the high and low levels of activity. Make sure your line intersects the Y -axis.
3. Comment on the accuracy of your high-low estimates assuming a least-squares regression analysis estimated the total fixed costs to be $1,185.45 per month and the variable cost to be $37.82 per ingot. How would the straight line that you drew in requirement 2 differ from a straight line that minimizes the sum of the squared errors?
Step by Step Answer:
Managerial Accounting for Managers
ISBN: 978-0078025426
3rd edition
Authors: Eric Noreen, Peter Brewer, Ray Garrison