High-Low Method; Scattergraph AnalysisThe following data below relates to units shipped and total shipping expense have been assembled by Macey Company, a wholesaler of large, custom-built solar water heaters for private households: MonthUnits shippedTotal Shipping ExpenseJanuary3$ 1,800February6$ 2,300 March4$ 1,700April5$ 2,000May7$ 2,300June8$ 2,700July2$ 1,200 Required: Using the high-low method, estimate a cost formula for shipping expense. Express the cost formula as a linear equation in the form Y=a + bX. Assume that 9 units are budgeted for the month of August. Use the cost formula above to calculate: The total variable cost for shipping for the month of August The total cost of shipping for the month of August. Which method separating mixed cost is most accurate? Provide reasons for your answer based on the strengths and weaknesses of the various methods used for separating mixed costs. The president of the company has no confidence in the high-low method and would like you to check your results using a Prepare a scattergraph, using the data given above. Plot cost on the vertical axis and activity on the horizontal axis. Use a ruler to fit a straight line to your plotted points. Using your scattergraph, estimate the approximate variable cost per unit shipped and the approximate fixed cost per month.

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Answered: High-Low Method; Scattergraph Analysis…

Essentials of Business Analytics (MindTap Course List)

2nd Edition

ISBN:9781305627734

Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Publisher:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Chapter6: Statistical Inference

Section: Chapter Questions

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High-Low Method; Scattergraph Analysis

The following data below relates to units shipped and total shipping expense have been assembled by Macey Company, a wholesaler of large, custom-built solar water heaters for private households:

Month	Units shipped	Total Shipping Expense
January	3	$ 1,800
February	6	$ 2,300

March	4	$ 1,700
April	5	$ 2,000
May	7	$ 2,300
June	8	$ 2,700
July	2	$ 1,200

Required:

Using the high-low method, estimate a cost formula for shipping expense.
Express the cost formula as a linear equation in the form Y=a + bX.
Assume that 9 units are budgeted for the month of August. Use the cost formula above to calculate:
1. The total variable cost for shipping for the month of August
2. The total cost of shipping for the month of August.
Which method separating mixed cost is most accurate? Provide reasons for your answer based on the strengths and weaknesses of the various methods used for separating mixed costs.
The president of the company has no confidence in the high-low method and would like you to check your results using a
1. Prepare a scattergraph, using the data given above. Plot cost on the vertical axis and activity on the horizontal axis. Use a ruler to fit a straight line to your plotted points.
2. Using your scattergraph, estimate the approximate variable cost per unit shipped and the approximate fixed cost per month.

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