Question: Discussion Question The table below shows monthly data collected on production costs and on the number of units produced over a twelve month period. Month
Discussion Question
The table below shows monthly data collected on production costs and on the number of units produced over a twelve month period.
| Month | Total Production Costs | Level of Activity (Units Produced) |
| July | $230,000 | 3,500 |
| August | 250,000 | 3,750 |
| September | 260,000 | 3,800 |
| October | 220,000 | 3,400 |
| November | 340,000 | 5,800 |
| December | 330,000 | 5,500 |
| January | 200,000 | 2,900 |
| February | 210,000 | 3,300 |
| March | 240,000 | 3,600 |
| April | 380,000 | 5,900 |
| May | 350,000 | 5,600 |
| June | 290,000 | 5,000 |
- Determine the variable cost per unit and the fixed cost using the high-low method.
- What is the equation of the total mixed cost function?
- Prepare the scatter diagram, clearly showing any outliers.
- Using the line of best-fit, determine the companys fixed cost per month and the variable cost per unit. (Use 0 & 5,000 units.)
- In view of the departments cost behaviour pattern, which of the two methods appear more appropriate? Explain your answer.
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