Draw a scattergraph relating overhead costs

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Reference no: EM13554571

High-Low Method, Scattergraph

Academy Products manufactures a variety of custom components for use in aircraft navigation and communications systems. The controller has asked for your help in estimating fixed and variable overhead costs for Academy's Rio Puerco plant. The controller tells you that the best cost driver for estimating overhead is machine-hours. Monthly data on machine-hours and overhead costs for the last year have been collected and are shown below:

Month

Machine-Hours

Overhead Costs

1

630,000

$ 660,000

2

900,000

2,170,000

3

765,000

1,220,000

4

665,000

780,000

5

1,035,000

3,700,000

6

800,000

1,400,000

7

750,000

1,100,000

8

815,000

1,500,000

9

935,000

2,500,000

10

680,000

840,000

11

715,000

980,000

12

700,000

910,000

Required

a. Estimate the monthly fixed costs and the unit variable cost per machine-hour using the highlow estimation method.

b. Draw a scattergraph relating overhead costs to the number of machine-hours.

c. Considering your scattergraph, how much confi dence do you have in your estimate from requirement (a)?

Reference no: EM13554571

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