The Outer Border Company determined that its packaging costs were a function of the weight of the packages. For budgeting purposes, the company wishes to identify the fixed costs and the variable costs of the packaging department. A sample of actual cost data from 2022 is provided in the table:

a. If the company used the high–low method, what are its fixed costs, variable costs per pound, and cost equation?

b. Create a scatterplot of these observations and draw a line through the group of points that best represents the trend of the points and the distribution of points above and below the line.

c. Now assume a regression analysis was run. The output identifies that the fixed costs are $74,286 (intercept coefficient) and the variable costs are $.853 per pound (X Variable 1). Compare the results to the results obtained using the high–low method in part (a). What are the consequences of using one method versus the other?

d. What are some issues that the company should be concerned about with respect to the data itself?

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Month July August September October November Total Costs $200,000 $280,000 $100,000 $210,000 $170,000 Pounds 120,000 240,000 60,000 180,000 90,000