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.
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.
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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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.
Transcribed Image Text:The table below shows monthly data collected on production costs and on the number of
units produced over a twelve month period.
Level of Activity
(Units Produced)
Month
Total Production
Costs
July
$230,000
3,500
August
250,000
3,750
September
260,000
3,800
October
220,000
3,400
November
340,000
5,800
December
330,000
5,500
January
200,000
2,900
February
210,000
3,300
March
240,000
3,600
April
380,000
5,900
Мay
350,000
5,600
June
290,000
5,000
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 og 5,000 units.)
e) In view of the department's cost behaviour pattern, which of the two methods
appear more appropriate? Explain your answer.
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