Unifying concepts-high-low method-scatterplot

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Reference no: EM13115818

You have been hired as a consultant for Jones Inc. The company manufactures high-density compact disks and sells them to a wide variety of business clients.

Management is eager to learn more about the company's cost behavior. You have been provided the following data. Assume all production falls within the relevant range.

Spreadsheet

Month Machine Hours Utility Costs

January 290 $10,700

February 280 10,400

March 320 11,600

April 340 12,100

May 350 12,400

June 290 10,750

July 300 10,800

August 300 10,900

September 310 11,200

October 340 12,200

November 290 10,600

December 310 11,000

1. Using the high-low method, compute the variable and fixed elements of Jones' utility costs.

2. Plot the information on a scattergraph. Based on your graph, determine the unit variable cost and monthly fixed costs.

3. Using the least squares method (either the equation approach or a software package), calculate the variable and fixed cost components. Determine the cost formula.

4. Interpretive Question: Why are the variable cost per unit and fixed costs different for each of these methods of analysis? Which method is the most accurate for determining variable and fixed cost components?

Reference no: EM13115818

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