Question

Below is data for eVolvalution, Inc. for volumes of units manufactured and sold and related total costs for five recent periods. August 860 units $41,340 total costs September 830 units $41,800 total costs October 910 units $43,510 total costs November 920 units $43,100 total costs December 990 units $47.450 total costs Based on this data, estimate the company's (i) variable costs (VCs) per unit and (ii) fixed costs, under each of the following approaches: (a) High-Low Method (b) Scattergraph Method (c) Regression Method Include with the response a graphical representation of these observations and linear estimates (for high-low and scattergraph).

Answer 1

A B с D E F H 8 9 10 Months Aug Sep Oct Nov Dec Units (X) 860 830 910 920 990 = 4,510 Total Cost (Y) 41,340 41,800 43,510 43,100 47,450 = 217,200 (X-X) -42.00 -72.00 8.00 18.00 88.00 (Y-Y) -2,100.00 -1,640.00 70.00 -340.00 4,010.00 (X-X) (Y-Y) 88,200.00 118,080.00 560.00 -6,120.00 352,880.00 E = 553,600 (X-X) 1,764.00 5,184.00 64.00 324.00 7,744.00 E = 15,080 Part a Level of Activity Cost associated with Level Highest Level 990 47,450 Lowest Level 830 41,800 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 Variable Cost per order = (Total Cost of highest level of Activity – Total Cost of lowest level of Activity) (Highest Level of Activity - Lowest Level of Activity) Variable Cost per order = 35.31 (47,450-41 800) = (900-830) Fixed Cost = Total cost at highest level - Variable cost at highest level 12,490.63 47,450 - (35.31 x 990) Variable cost = 35.31 Fixed Cost = 12,490.63 Hence Cost Equation is, Y = 12,490.63 + 35.31X

-50000 Y = 35.31 X + 12490.63 -48000 -46000 -440007 420001 -40000 50 800 850 900 950 1000 1050

(b)

-50000 -48000 Y= 36.7109 X + 10326.8 Variable cost = 36.71 -46000 Fixed cost = 10,326.8 -44000 -42000 -40000 750 800 850 900 950 1000 1050

B n D E X = 902.00 ΣΧ n 4510 5 Y = ΣΥ n 43,440.00 217200 5 A 36 37 Part 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 'b = 36.71 (X-X(Y-Y (X- X2 553, 0.0 15,080.00 'a = Y -b (X) 43,400 - 36.71 (902) 10,326.79 Variable cost = 36.71 Fixed Cost = 10,326.79 Hence Cost Equation is, Y = 10,326.79 + 36.71X re