The administrator of Scotland Yard would like a cost formula linking the costs involved in processing law offenders to the number of offenders processed during a month. The processing costs and the number of offenders for the preceding twelve months are given in the following table: Month Number of Offenders Processing Costs August 200 182,700 September 440 410,600 October 420 391,000 November 450 437,100 December 510 434,000 January 380 395,950 February 610 801,800 March 330 367,150 April 260 220,500 May 370 404,250 June 320 362,400 July 380 323,950 The administrator has estimated that the institution's relevant range of monthly activity in the future will be 260 to 520 offenders. Required: 1. Use the high-low method to express the cost function for processing costs. The cost function needs to be able to reasonably predict future monthly costs for Scotland Yard. 2. Explain whether you will use this cost function to predict the processing costs for 600 law offenders.
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A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
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A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
The administrator of Scotland Yard would like a cost formula linking the costs involved in processing law offenders to the number of offenders processed during a month. The
| Month | Number of Offenders | Processing Costs |
| August | 200 | 182,700 |
| September | 440 | 410,600 |
| October | 420 | 391,000 |
| November | 450 | 437,100 |
| December | 510 | 434,000 |
| January | 380 | 395,950 |
| February | 610 | 801,800 |
| March | 330 | 367,150 |
| April | 260 | 220,500 |
| May | 370 | 404,250 |
| June | 320 | 362,400 |
| July | 380 | 323,950 |
The administrator has estimated that the institution's relevant range of monthly activity in the future will be 260 to 520 offenders.
Required:
1. Use the high-low method to express the cost function for processing costs. The cost function needs to be able to reasonably predict future monthly costs for Scotland Yard.
2. Explain whether you will use this cost function to predict the processing costs for 600 law offenders.
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