The following data relating to units shipped and total shipping expense have been assembled by ArcherCompany, a wholesaler of large, custom-built air-conditioning units for commercial buildings:Units Total ShippingMonth Produced ExpenseJanuary ............................. 3 $1,800February ............................ 6 $2,300March ................................ 4 $1,700April ................................... 5 $2,000May ................................... 7 $2,300June .................................. 8 $2,700July .................................... 2 $1,200Required:1. Using the high-low method, estimate a cost formula for shipping expense.2. The president of the company has no confidence in the high-low method and would like you to checkyour results using a scattergraph.a. Prepare a scattergraph, using the data given above. Plot cost on the vertical axis and activity on thehorizontal axis. Use a ruler to fit a straight line to your plotted points.b. Using your scattergraph, estimate the approximate variable cost per unit shipped and theapproximate fixed cost per month with the quick-and-dirty method.3. What factors, other than the number of units shipped, are likely to affect the company’s total shippingexpense? Explain.
The following data relating to units shipped and total shipping expense have been assembled by Archer
Company, a wholesaler of large, custom-built air-conditioning units for commercial buildings:
Units Total Shipping
Month Produced 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:
1. Using the high-low method, estimate a cost formula for shipping expense.
2. The president of the company has no confidence in the high-low method and would like you to check
your results using a scattergraph.
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.
b. Using your scattergraph, estimate the approximate variable cost per unit shipped and the
approximate fixed cost per month with the quick-and-dirty method.
3. What factors, other than the number of units shipped, are likely to affect the company’s total shipping
expense? Explain.
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 8 images
