Reference no: EM132664791

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

Problem a) Determine the variable cost per unit and the fixed cost using the high-low method.

Problem b) What is the equation of the total mixed cost function?

Problem c) Prepare the scatter diagram, clearly showing any outliers.

Problem d) Using the line of best-fit, determine the company's fixed cost per month and the variable cost per unit. (Use 0 & 5,000 units.)

Problem e) In view of the department's cost behaviour pattern, which of the two methods appear more appropriate? Explain your answer.