Reference no: EM132516396

Scatter Diagrams and High-Low Cost Estimation

Assume the local Pearle Vision has the following information on the number of sales orders received and order-processing costs.

Month Sales Orders Order - Processing Costs

1            3,000                             $82,700

2             1,500                               50,375

3             4,400                            120,700

4             2,800                             81,900

5            2,300                             69,775

6             1,200                            43,100

7             2,000                           62,500

Required

Question (a.) Use information from the high- and low-volume months to develop a cost-estimating equation for monthly order-processing costs.

Question (b.) Plot the data on a scatter diagram. Using the information from representative high-and low-volume months, develop a cost estimating equation for monthly production costs. If needed, an Excel worksheet is provided in the following link in order to create the scatter diagram.