The Knapp Company needs to predict the labor cost in producing small carrot patch dolls. The following production information is available:

The technology has not changed since 2005. Wage rates have steadily increased since 2005; however, management expects no further wage increases in 2011.

Required:

1. Select the appropriate independent variable for predicting labor cost. Explain the reason for your selection.
2. Develop an equation to predict for 2011 the labor cost of producing carrot patch dolls. Use the high-low method.
3. Estimate the labor cost of producing 3000 carrot patch dolls for 2011 if 3,000 dolls are expected to produce.