Refer to the Montrose Oil and Lube data in S6-7. Use the high-low method to determine the variable and fixed cost components of Montrose Oil and Lube’s operating costs. Use this information to project the monthly operating costs for a month in which the company performs 3,400 oil changes.

Data From S6-7:-

Montrose Oil and Lube is a car care center specializing in ten-minute oil changes.
Montrose Oil and Lube has two service bays, which limits its capacity to 4,000 oil changes per month. The following information was collected over the past six months:

1. Prepare a scatterplot graphing the volume of oil changes (x-axis) against the company’s monthly operating expenses (y-axis). Graph by hand or use Excel.
2. How strong a relationship does there appear to be between the company’s operating expenses and the number of oil changes performed each month? Explain.
Do there appear to be any outliers in the data? Explain.
3. Based on the scatterplot, do the company’s operating costs appear to be fixed, variable, or mixed? Explain how you can tell.
4. Would you feel comfortable using this information to project operating costs for a volume of 3,800 oil changes per month? Explain.

Transcribed Image Text:

Month Number of Oil Changes Operating Expenses January February 3,200 $36,400 2,600 $31,900 March 2,800 $32,850 April... 2,700 $32,500 May... 3,600 $37,000 June. 2,900 $33,700