Zerbel Company, a wholesaler of large, custom-built air conditioning units for commercial buildings, has noticed considerable fluctuation in its shipping expense from month to month, as shown below:

Required:
1. Using the high-low method, estimate the cost formula for shipping expense.
2. The president has no confi dence in the high-low method and would like you to €œcheck out€ your results using the scattergraph method. Do the following:
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 fi t 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 shipping expense?Explain.

Transcribed Image Text:

Units Total Shipping Shipped Expense January February.. March....-.. April May June July $2,200 $3,100 $2,600 $1,500 $2,200 $3,000 $3,600