Nabil Woodcraft Company (NWC) manufactures “antique” wooden cabinets to house modern radio and CD players. NWC began operations in January of last year. Paul Nabil, the owner, asks for your assistance. He believes that he needs to better understand the cost of the cabinets for pricing purposes. You have collected the following data concerning actual production over the past year: 

.:.

Required

a. To understand the department’s cost behavior, you decide to plot the points on graph paper and sketch a total cost line. 

(1) Enter the number of units and their costs in increasing order. 

(2) Plot the points on the graph. 

(3) Sketch a graph so the line “splits” all of the points (half of the points appear above and half below the line). 

(4) Using the line you just sketched, visually estimate the total cost to produce 2,000 units.

b. Using the high-low method, compute the total cost equation for the preceding data. 

(1) Compute the variable cost per unit. 

(2) Compute total fixed costs. 

(3) Sketch a line between the high and low points on your graph. 

(4) Calculate the total cost assuming 2,000 cabinets are made.

c. Comment on which method you believe is better. 

Transcribed Image Text:

Number of Cabinets Produced Month Total Cost January February $21,000 32,500 800 3,600 1,960 March 29,500 18,600 29,000 27,000 April May June 600 1,600 1,300 July August September October 1,100 1,800 25,600 31,000 32,000 31,500 32,000 2,280 2,940 3,280 November December 400 16,500