The table below shows monthly data collected on production costs and on the number of units produced
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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
- a)Determine the variable cost per unit and the fixed cost using the high-low method.
- b)What is the equation of the total mixed cost function?
- c)Prepare the scatter diagram, clearly showing any outliers.
- d)Using the line of best-fit, determine the company's fixed cost per month and thevariable cost per unit. (Use 0 & 5,000 units.)
- e)In view of the department's cost behaviour pattern, which of the two methodsappear more appropriate? Explain your answer.
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