Question

month	total distribution cost	level of activity (unit produced)
july	230.000	3500
august	250.000	3750
september	260.000	3800
october	220.000	3400
november	340.000	5800
december	330.000	5500
January	200.000	2900
February	210.000	3300
March	240.000	3600
April	380.000	5900
may	350.000	5600
june	290.000	5000

a) Determine the variable cost per unit and the fixed cost using the high-low method.

b) What is the equation of the total mixed cost function?

c) Prepare the scatter diagram, clearly showing any outliers.

d) Using the line of best-fit, determine the company’s fixed cost per month and the variable cost per unit. (Use 0 & 5,000 units.)

e) In view of the department’s cost behaviour pattern, which of the two methods appear more appropriate? Explain your answer.

Answer 1