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Oki Products, LTD., has observed the following processing costs at various levels of activity over last 15 months:
Month
Units Produced
Processing Cost
1
4,500
$38,000
2
11,000
$52,000
3
12,000
$56,000
4
5,500
$40,000
5
9,000
$47,000
6
10,500
7
7,500
$44,000
8
5,000
$41,000
9
11,500
10
6,000
$43,000
11
8,500
$48,000
12
10,000
$50,000
13
6,500
14
9,500
15
8,000
$46,000
Use the company's historical data for months 1 to 15 and
(i) Find the High-Low equation for this company, and then
(ii) Use the High-Low equation to predict the processing cost for month 20 when the company plans to produce 7,000 units, and also
(iii) use the High-Low equation to predict the processing cost for month 21 when the company plans to produce 10,300 units.
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