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ACCTG322 (19)

Chapter 6 In class questions_solutions.pdf

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Trish Stringer

In Class 61HighLow Method Scattergraph Analysis Required 1 Using the highlow method estimate the cost formula for shipping expense Units Shipped Shipping ExpenseHigh activity level8 3600Low activity level21500Change 6 2100Variable cost element Change in cost2100350 per unitChange in activity6 unitsFixed cost element Shipping expense at the high activity level3600Less variable cost element 350 per unit8 units 2800Total fixed cost 800 The cost formula is 800 per month plus 350 per unit shipped orY800350Xwhere X is the number of units shippedRequired 2 The president has no confidence in the highlow method and would like you to check out your results using the scattergraph methodDo the following a Prepare a scattergraph using the data given abovePlot cost on the vertical axis and activity on the horizontal axisUse a ruler to fit a straight line to your plotted points400035003000250020001500Total Shipping Expense1000500001234567891 0Units Shipped b Using your scattergraph estimate the approximate variable cost per unit shipped and the approximate fixed cost per month with the scattergraph methodNote Students answers will vary due to the imprecision and subjective nature of this method of estimating variable and fixed costsTotal cost at 5 units shipped per month a pointfalling on the line in a2600 Less fixed cost element intersection of the Y axis 1100 Variable cost element1500 15005 units300 per unit The cost formula is 1100 per month plus 300 per unit shipped or Y1100300X where X is the number of units shipped
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