Question:
The Salinas Corporation has gathered the following data on its copy machine costs for the first eight months of the year.
|
Month
|
Number of Copies
|
Total Copy Cost
|
|
January
|
60,000
|
$ 7,400
|
|
February
|
50,000
|
$ 6,500
|
|
March
|
70,000
|
$ 7,000
|
|
April
|
90,000
|
$ 9,200
|
|
May
|
80,000
|
$ 7,600
|
|
June
|
100,000
|
$ 8,500
|
|
July
|
120,000
|
$10,000
|
|
August
|
110,000
|
$ 9,800
|
Required
1. Prepare a scattergraph of the cost information and then choose a line that you believe best represents the cost function. Represent your chosen line with a cost equation of the form y = mx + b. Show your calculations.
2. Using the high-low method, what is the variable cost per copy?
3. Using the high-low method, what is the fixed cost per month?
4. Using the high-low method, represent the cost function with a cost equation of the form y = mx + b.
5. Using your cost equation from part (d), provide your best estimate of the copy costs for September if 70,000 copies will be made. Why does your estimate differ from the $7,000 cost incurred in March?