Question

2-20 Scattergraph; high-low method; cost estimation (LO 2) 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 Required a. Prepare a scattergraph of the cost information and then choose a line that you believe best represents the cost function. Represent your chosen line with a cost equation of the form y = mx + b. Show your calculations. Using the high-low method, what is the variable cost per copy? Using the high-low method, what is the fixed cost per month? d. Using the high-low method, represent the cost function with a cost equation of the form y = mx + b. Using your cost equation from part (a), provide your best estimate of the copy costs for September if 80,000 copies will be made. Why does your estimate differ from the $5,100 cost incurred in April? Numeric Answer:
please answer A - E! Thank you!

Answer 1

Saltorgraph & Equations my Choo 0 to 30 o Mo S o 70 e 90 jollo Cobito o All Poul Cam, 1900) 6 $1500 at Zero copy, 1900-IS M O eve LIDO at 102H150

b & c)
	copy	costs
High	105000	6000
Low	35000	3200
difference	70000	2800
Variable cost = 2800/70000 = 0.04
Fixed cost = 3200 - (35000*0.04)=1800
d) Equation :
y = 0.04x + 1800
e) at 80000 copies, cost estimated = 80000*0.04 + 1800 = $5000
The estimate is different from April actual cost of $5100 at
80000 copies because it is an average of high & low and not
the actual average of all figures. It is calculated on the basis
of equation drawn on High/Low basis.