$2\mathrm{.}18$ Cost function using high$-$low and regression; quality of cost estimates LO$4,5$

Following are sales and administrative cost data for Big Jack Burgers for four months:

Sales Administrative costs

September $ $632100$ $$43333$

October $84250057770$

November $108790062800$

December $113210068333$

Administrative cost is a mixed cost, and sales is a potential cost driver.

Required

$($a$)$ Using the high$-$low method, create a cost function for administrative costs.

$($b$)$ In your own words, explain why the high$-$low method might not be a good method for estimating

the cost function.

$($c$)$ Create a scatter plot and add a trend line. After examining the plot, use your judgement to

determine whether the cost is fixed, variable or mixed.

$($d$)$ Perform regression analysis to create a cost function for administrative costs.

$($e$)$ Can we know for certain that the cost function from part $($d$)$ provides a good estimate for next

month$$s administrative costs? Why?

$($f$)$ Discuss whether sales are an economically plausible driver for administration costs for Big

Jack Burgers.