The following graph was constructed and data plotted to apply the visual-fit method. Then, the predicted total
Question:
The following graph was constructed and data plotted to apply the visual-fit method. Then, the predicted total order-department costs for processing 90 orders was computed. Comment on the accuracy of the analysis. Do your own analysis and explain any differences. Assume the data in parentheses are accurate in thousands of dollars and number oforders.
Transcribed Image Text:
S500 100, 450) (20, 280) (80, 420) (10, 240) (70, 320) (40, 240) 200 Fixed cost 200 Total cost 450, so variable cost 450 200 250 or 250100 orders = 2.50 per order 50 10 20 40 70 80 100 Orders Processed The total cost function is TC = 200 2.50 × # Orders Processed TC90 Orders! = 200,000 + 2.50 × 90 = $200,225
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The analysis is faulty because of the following errors 1 The scales used for both axes are incorrect ...View the full answer
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Related Book For
Introduction to Management Accounting
ISBN: 978-0133058789
16th edition
Authors: Charles Horngren, Gary Sundem, Jeff Schatzberg, Dave Burgsta
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