Question: Estimating a cost function, high-low method. Lacy Dallas is examining customer-service costs in the southern region of Camilla Products. Camilla Products has more than 200 separate electrical products that are sold with a 6-month guarantee of full repair or replacement with a new product. When a product is returned by a customer, a service report is prepared. This service report includes details of the problem and the time and cost of resolving the problem. Weekly data for the most recent 8-week period are as follows:
1. Plot the relationship between customer-service costs and number of service reports. Is the relationship economically plausible?
2. Use the high-low method to compute the cost function relating customer-service costs to the number of service reports.
3. What variables, in addition to number of service reports, might be cost drivers of weekly customerservice costs of Camilla Products?