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Question - Lynsay Detz is examining customer-service costs in the southern region of Clancey Products. Clancey Products has more than 200 separate electrical products that are sold with a 6-month guarantee of full repair or replacement with a new product. When a product is returned by a customer, a service report is prepared. This service report includes details of the problem and the time and cost of resolving the problem. Weekly data for the most recent 8-week period are as follows:
Week
Customer-Service Department Costs
Number of Service Reports
1
$13,400
210
2
20,200
300
3
11,300
130
4
18,900
385
5
14,700
285
6
22,500
450
7
16,300
330
8
21,600
310
Required -
1. Plot the relationship between customer-service costs and number of service reports. Is the relationship economically plausible?
2. Use the high-low method to compute the cost function relating customer-service costs to the number of service reports.
3. What variables, in addition to number of service reports, might be cost drivers of weekly customer-service costs of Clancey Products?
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