Estimating fixed and variable costs using the high-low method Knox Boat Company makes inexpensive aluminum fishing boats. Production is seasonal, with considerable activity occurring in the spring and summer. Sales and production tend to decline in the fall and winter months. During 2011, the high point in activity occurred in June when it produced 200 boats at a total cost of $140,000. The low point in production occurred in January when it produced 40 boats at a total cost of $44,000.

Required

a. Use the high-low method to estimate the amount of fixed cost incurred each month by Knox Boat Company.

b. Determine the total estimated cost if 100 boats are made.

c. Comment on the strengths and weaknesses of the high-low method.

d. Explain how a visual fi t scattergraph could be used to improve accuracy.