Response to the following problem:
Oki Products, Ltd., has observed the following processing costs at various levels of activity over the last 15 months:
| Month |
Units Produced |
Processing Cost |
|
1 ................
|
4,500
|
$38,000
|
|
2 .................
|
11,000
|
$52,000
|
|
3 . ...............
|
12,000
|
$56,000
|
|
4 ....................
|
5,500
|
$40,000
|
|
5 . ..................
|
9,000
|
$47,000
|
|
6 ....................
|
10,500
|
$52,000
|
|
7
|
7,500
|
$44,000
|
|
8 .................
|
5,000
|
$41,000
|
|
9 ....................
|
11,500
|
$52,000
|
|
10 .................
|
6,000
|
$43,000
|
|
11 ..................
|
8,500
|
$48,000
|
|
12 .................
|
10,000
|
$50,000
|
|
13 .................
|
6,500
|
$44,000
|
|
14 .................
|
9,500
|
$48,000
|
|
15 .................
|
8,000
|
$46,000
|
Required:
1. Prepare a scattergraph using the above data. Plot cost on the vertical axis and activity on the horizontal axis. Fit a line to your plotted points using a ruler.
2. Using the quick-and-dirty method, what is the approximate monthly fixed cost? The approximate variable cost per unit processed? Show your computations.