Merdam Co.'s monthly sales and costs 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 costs 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) $200 and
(b)$340

Transcribed Image Text:

Period Sales Total Cost Period Sales Total Cost $290 186 370 210 170 116 190 158 l.$390 $194 174 210 46 2 .250 ...270 0. 170 11 350 230 178 310 90 430 162 12