High-Low Points and Least Squares Methods (Appendix). The controller at Telbur Company has analyzed data that relate to material handling costs and tons of material handled for the last six months. These data are shown below: Month Total Tons in thousands Total Cost in thousands Janu 10 $110 February 25 270 Mach 40 430 Ap 540 May 20 215 June 35 375 The controller believes material handling costs to be a mixed cost. In his attempt to budget these costs for the remainder of the year, he needs to determine the variable rate per ton and the fixed cost per month. Required:

a. Determine the fixed and variable elements of material handling costs using the following:

1.

High-low points method.

2.

Least squares method. (Round the variable rate to the nearest tenth of cent.)

b. Comment on the reason for the differences in the solutions to parts (1) and (2) above.