Question

The Aust Corporation has gathered the following data on its copy machine costs for the first eight months of the year.

Month		Number of Copies			Total Copy Cost
January		40,000			$ 3,500
February		35,000			$ 3,200
March		60,000			$ 4,100
April		80,000			$ 5,100
May		85,000			$ 5,600
June		75,000			$ 4,800
July		82,000			$ 5,300
August		105,000			$ 6,000

(a)

Assuming the line intersects the y-axis at $2,000 and using the January activity levels what is the equation of the line that would be drawn for a scattergraph. (Round variable cost to 4 decimal places, e.g. 15.2513 and fixed cost to 0 decimal places, e.g 1526.)

y

=

$  /copy +

$

Answer 1

Answer

y = $ 0.0375 / copy + $ 2,000

Explanation:

the line intersects the y-axis at $2,000. So, it means that Fixed cost is $ 2,000.

Now, Total cost = Fixed cost + (Variable Cost per unit * Units)

$ 3500 = $ 2000 + (Variable Cost per unit * 40,000)

$ 1500 = (Variable Cost per unit * 40,000)

Variable Cost per unit = $ 0.0375 per unit

In case of any doubt, please comment.