Scatter Chart Selection and High-Low Points Method. Big Burst Balloon Company frequently must hire temporary secretarial help

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Scatter Chart Selection and High-Low Points Method. Big Burst Balloon Company frequently must hire temporary secretarial help and also pay overtime wages to its full-time secretaries. Management believes that the need for additional secretarial help is based on either total sales or the total number of employee hours worked. Data from last year's records are shown below: Total Secretarial Total Total Number of Employee Month Expense Sales Hours January February $14,000 5100.000 10,000 15.000 130,000 12,000 March 12,000 80,000 14,000 April 15,000 150,000 20,000 May 19.000 200,000 15,000 June 20,000 250,000 18,000 July 22.000 300,000 30,000 August 20,000 240,000 30,000 September 17,000 180,000 28,000 October 16,000 160,000 30,000 November 14,000 110,000 25,000 December 13.000 90,000 20,000 Required:

a. Prepare two scatter charts to determine which activity-total sales or total number of employee hours-is the appropriate cost driver for the variable element of total secretarial expense.

b. Using the appropriate scatter chart prepared in part (a), visually estimate the straight-line that represents total cost. Draw this line and estimate the fixed cost and variable rate.

e. Using the cost driver determined in part (a), use the high-low points method to calculate the variable rate and the fixed cost per month. (Round the variable rate to the nearest hundredth of a percent.)

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Related Book For  book-img-for-question

Managerial Accounting

ISBN: 9780759314078

6th Edition

Authors: Pierre L. Titard

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