Molina Company is a value-added computer reseller that specializes in providing services to small companies. The company

Question:

Molina Company is a value-added computer reseller that specializes in providing services to small companies. The company owns and maintains several vehicles for use by its sales staff. All expenses of operating these vehicles have been entered into an automobile expense account on the company?s books. Along with this record of expenses, the company has also kept a careful record of the number of kilometres the vehicles have been driven each month.

The company?s records of kilometres driven and total vehicle expenses over the past 10 months are given below:

image

Molina Company?s president wants to know the cost of operating the fleet of vehicles in terms of the fixed monthly cost and the variable cost per kilometre driven.

Required:

1. Prepare a scattergraph using the data provided. Place cost on the vertical axis and activity (kilometres driven) on the horizontal axis. Fit a regression line to the plotted points by simple visual inspection.

2. By analyzing your scattergraph, estimate fixed cost per month and the variable cost per kilometre driven.

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Introduction to Managerial Accounting

ISBN: 978-1259105708

5th Canadian edition

Authors: Peter C. Brewer, Ray H. Garrison, Eric Noreen, Suresh Kalagnanam, Ganesh Vaidyanathan

Question Posted: