Introduction:
Scatter diagram: A scatter diagram is a graph where two variables are plotted along two axis in the form of dots and it reveals a correlation, if any present.
High-low method: High low method provides a technique to estimate the fixed cost and variable cost separately from the given mixed cost. In this case, the extreme two values of the activity level are chosen from the given set of data and also their corresponding total costs to estimate the fixed cost and variable cost as shown below. Here, activity level is considered as sales volume in units.
1.
To Plot:
A scatter diagram for the given data with sales volume in units, plotted on the horizontal axis and total cost plotted on the vertical axis.
2.
To estimate:
Both variable cost and fixed cost using high low method and also draw total costs line on the above scatter diagram.
3.
To predict:
Future total cost when sales volume is (a) 100,000 units and (b) 170,000 units

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Chapter 21 Solutions
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