.11 96% 3:14 PM Menu e glenn vaca- Scatter Diagrams and High-Low Cost Estimation

Question

.11 96% 3:14 PM Menu e glenn vaca- Scatter Diagrams and High-Low Cost Estimation From April 1 through October 31, Will County Highway Department hires temporary employees to mow and clean the right-of-way along county roads. The County Road Commissioner has asked you to help her in determining the variable labor cost of mowing and cleaning a mile of road. The following information is available regarding current-year operations: Miles Mowed Labor Month and Cleaned Costs 350 $4,000 300 3,750 400 4,500 250 2,750 375 4,250 200 2,500 100 2,400 April une July August September October a. Use the information from the high- and low-volume months to develop a cost- estimating equation for monthly labor costs Monthly labor costs = 0

Explanation / Answer

a) We have,
at highest activity: x2 = 400; y2 = $4,500
at lowest activity: x1 = 100; y1 = $2,400

Variable Cost per Unit = ($4,500 $2,400) ÷ (400 100) = $7 per unit
Total Fixed Cost = $4,500 ($7 × 400) = $2800
Cost Volume Formula: y = $2800 + 7x

d) Assuming fixed cost is constant and variable wages increase 7%

Miles Moved   As per high Low method   As per given data     
350      4321.5                        4000   
300      3947                           3750     
400      4696                          4500   
250      3572.5                        2750  
375      4508.75                      4250     
200      3198                           2500     
100      2449                           2400  

b)

y=7.786x+1253.25

please comment befor providing feedback thank you.

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