Sue North is examining customer- service costs in the southern region of Capitol Products. Capitol Products has
Question:
Sue North is examining customer- service costs in the southern region of Capitol Products. Capitol Products has more than 200 separate electrical products that it sells with a 6- month guarantee of full repair or replacement with a new product. When a customer returns a product, 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:
![Sue North is examining customer- service costs in the southern](https://dsd5zvtm8ll6.cloudfront.net/si.question.images/image/images6/388-B-M-A-D-M(2250).png)
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 other variables, besides number of service reports, might be cost drivers of weekly customer- service costs of Capitol Products? How might Sue North go about determining which cost driver best explains customer- service departmentcosts?
Step by Step Answer:
Managerial Accounting Decision Making and Motivating Performance
ISBN: 978-0137024872
1st edition
Authors: Srikant M. Datar, Madhav V. Rajan