Scattergraph Method and High-Low Method of Analyzing Mixed Costs Sailmaster makes boats and has the following costs and production levels for the last eight quarters:

1. Plot the data on a scattergraph, and visually fit a straight line through the points.
2. Based on your graph, estimate the quarterly fixed cost and the variable cost per unit produced.
3. Use the high-low method to compute the variable and fixed elements of Sailmaster’s total costs, and then draw a straight line through the high and low data points on the scattergraph.
4. Compute the total cost of making 500 boats using first the scattergraph results and then using the high-low method results.
5. Comment on the differences between these two methods. Which method appears to most accurately represent the actual variable and fixed costs for Sailmaster?

Transcribed Image Text:

Quarter Boats Produced Total Costs 1234567 c 108 $101,250 128 168,750 185 189,000 245 200,145 311 276,200 352 255,250 389 305,700 8 428 376,500