Question: Alden Co.'s monthly sales and cost data for its operating activities of the past year follow. Management wants to use these data to predict future fixed and variable costs.
Required: 1. Prepare a scatter diagram for these data with sales volume (in $) plotted on the horizontal axis and total cost plotted on the vertical axis.
2. Estimate both the variable costs per sales dollar and the total monthly fixed costs using the high-low method. Draw the total costs line on the scatter diagram in part 1.
3. Use the estimated line of cost behavior and results from part 2 to predict future total costs when sales volume is (a) $380,000 and (b) $420,000.