Reference no: EM133031970

Question - The Miller Company has assembled the following data pertaining to certain costs which cannot be easily identified as either fixed or variable. Miller has heard about two methods of developing cost functions called the high-low method & scatter-gram method and has decided to compare both methods.

The table below shows monthly data collected on department costs and on the number of hours worked over a recent 12-month period.

Department Costs	# of Hours
37,000	3,700
23,000	1,600
37,000	4,100
47,000	4,900
33,000	3,300
39,000	4,400
32,000	3,500
33,000	4,000
17,000	1,200
18,000	1,300
22,000	1,800
20,000	1,600

Required -

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

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

c) Prepare the scatter diagram for Miller Company.

d) Using the line of best-fit, determine Miller's fixed cost per month and the variable cost per hour.

e) Which of the two methods appear more appropriate? Explain your answer.