Question

Cubicle Solutions sells productivity software such as word processors, spreadsheets, and personal information managers. Cubicle prides itself on customer support and maintains a large call center where customers can call in with technical questions about the installation and use of Cubicle products.

Monthly data on the number of support calls and call center costs for the last year have been collected and are shown below (all activities and costs are in thousands):

Month	Support Calls	Call Center Cost
1	40	$521
2	52	660
3	48	620
4	42	550
5	58	710
6	50	640
7	47	620
8	51	650
9	54	670
10	43	575
11	45	595
12	44	580

Required:

a. Estimate the monthly fixed costs and the unit variable cost per support call using the high-low estimation method. (Round variable cost per unit to 2 decimal places. Enter your answer in thousands of dollars.)

b. Draw a scattergraph relating call center costs to the number of support calls.

Instructions:

1. On the graph below, use the point tool to plot the point corresponding to the call center costs to the relating number of support calls (Month 1).

2. Repeat the process for the remainder of the sample (Month 2, Month 3, … ).

3. To enter exact coordinates, double click on the point and enter the exact co-ordinates of x and y.

Answer 1

a)
1) High Low method
Step 1	Month	Support Calls	Call Center Cost
High Month	5	58	710
Low Month	1	40	$521
Difference		18	189
Step - 2 Variable cost per support call = 189/18	$10.50
Fixed Cost
Fixed cost = Highest activity cost – (Variable cost per unit x Highest activity units)
Month 5 = 710 + ($10.50 x 58 calls)	$101.00
Step -3 Fixed Cost per month	$101.00
Cost Equation = $101 + $10.50  per support call

CALL CENTER COST Monthly data on the number of support calls and call enter costs for the last year have been collected and are hown below (all activities and costs are in thousands): $800 Support Call Center Month Cost Month Month Month 9 Plot Area o 440 022620 O 595 097580 Month 4. O Month 1 Call centre Cost Cequired: . Estimate the monthly fixed costs and the unit variable ost per support call using the high-low estimation method. (Round variable cost per unit to 2 decimal places. nter your answer in thousands of dollars.) - Draw a scattergraph relating call center costs to the umber of support calls. structions: -. On the graph below, use the point tool to plot the point orresponding to the call center costs to the relating umber of support calls (Month 1).