Laurie Daley is examining customer-service costs in the southern region of Capitol Products. Capitol Products has more than 200 separate electrical products that are sold with a six-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:

Required
1. Plot the relationship between customer-service costs and number of service reports. Is the relation- ship 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 customer service costs of Capitol Products?

Transcribed Image Text:

Week Customer-Service Department Costs $13,700 20,900 13,000 18,800 14,000 21,500 16,900 21,000 Number of Service Reports 190 275 115 395 265 455 340 305