Question: The following data relating to units shipped and total shipping expense have been assembled by Archer Company, a wholesaler of large, custom-built air-conditioning units for

The following data relating to units shipped and total shipping expense have been assembled by Archer

Company, a wholesaler of large, custom-built air-conditioning units for commercial buildings;

Total Shipping Units Month Shipped Expense $1,800 January 3 February $2,300 $1,700 March 4 $2,000 April 5 May $2,300 $2,

Required:

1. Using the high-low method, estimate a cost formula for shipping expense.

2. The president of the company has no confidence in the high-low method and would like you to check your results using a scattergraph.

a. Prepare a scattergraph, using the data given above. Plot cost on the vertical axis and activity on the horizontal axis. Use a ruler to fit a straight line to your plotted points.

b. Using your scattergraph, estimate the approximate variable cost per unit shipped and the approximate fixed cost per month with the quick-and-dirty method.

3. What factors, other than the number of units shipped, are likely to affect the company’s total shipping expense? Explain.

Total Shipping Units Month Shipped Expense $1,800 January 3 February $2,300 $1,700 March 4 $2,000 April 5 May $2,300 $2,700 June $1,200 July 2

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