In: Accounting
Graphing Mixed Cost During a recent six-month period, Wade Corporation had the following
monthly production volume and total monthly maintenance expense:
Units Produced Maintenance Expense
March ...................................................21,000 140,000
April ....................................................15,000 112,000
May.....................................................30,000 184,000
June ....................................................27,000 172,000
July .....................................................35,000 208,000
August ..................................................25,000 160,000
Required
Assume that all volumes are in the relevant range.
a . Explain why the data indicate that the maintenance expense is neither a fixed nor a variable expense.
b . Construct a scattergraph and plot the maintenance expense data.
c . Fit a line (by sight) to the cost observation points and estimate the cost formula.
d. Confirm your answer in requirement (c) with high-low analysis.