Lynda Donovan is examining customer-service costs in the southern region of Clement Products. Clement Products has more than 200 separate electrical products that are sold with a 6-month guarantee of full repair or replacement with a new product. When a product is returned by a customer, a service report is prepared. This service report includes details of the problem and the time and cost of resolving the problem. Weekly data for the most recent 8-week period are as follows:

Required

1. Plot the relationship between customer-service costs and number of service reports. Is the relationship economically plausible?
2. Use the high-low method to compute the cost function relating customer-service costs to the number of service reports.
3. What variables, in addition to number of service reports, might be cost drivers of weekly customer service costs for Clement Products?

Transcribed Image Text:

Week Customer-Service Department Costs 1 2345678 £13,400 20,200 11,300 18,900 14,700 22,500 16,300 21,600 Number of Service Reports 210 300 130 385 285 450 330 310