During a recent six-month period, Wade Corporation had the following monthly production volume and total monthly maintenance expense:

Required
Assume that all volumes are in the relevant range.

a. Explain why the data indicate that the maintenance expense is neither a fixed nor a variable expense.

b. Construct a graph similar to the one in Exhibit 6-7 and plot the maintenance expense data.

c. Fit a line (by sight) to the cost observation points and estimate the cost formula.

d. Confirm your answer in requirement (c) with high-low analysis.

Transcribed Image Text:

Units Produced Maintenance Expense March... 21,000 $140,000 April 15,000 112,000 May. June 30,000 184,000 27,000 172,000 July. 35,000 208,000 August 25,000 160,000