1. In this Case, Exhibit 2 presents monthly data of units produced and sold, and actual costs incurred, for 24 months.

a. Create a scatterplot of costs and units. From your scatterplot, estimate the variable cost (VC) per unit and the total monthly fixed costs (FCs).

b. Are there any outliers in the data? If so, which observations?

c. What is the relevant range of activity represented by the data?

2. Using the data presented in case Exhibit 2, use the high-low method to estimate the VC per unit and the total monthly FCs. ( identify a typical high-activity observation and a typical low-activity observation, calculate the VC per unit, and calculate the total monthly FCs.) Write the cost function (please write the equation y=a + bx, where a=FC and b=VC/unit).

Exhibit 2 JW Sports Supplies (A) Production/Sales Levels and Costs by Month Actual units Actual cost Jan 1,000 $ 100,000 Feb 1,100 $ 106,000 Mar 1,175 $ 105,000 Apr 1,250 $ 120,000 May 1,410 $ 128,000 Jun 1,520 $ 132,000 Jul 1,600 $ 135,000 Aug 1,710 $ 140,000 Sep 1,800 $ 148,000 Oct 1,970 $ 150,000 Nov 970 $ 150,000 Dec 1,970 $ 120,000 Jan 1,510 $ 140,000 Feb 1,650 $ 130,000 Mar 1,450 $ 115,000 Apr 1,200 $ 112,000 May 1,210 $ 130,000 Jun 1,900 $ 154,000 Jul 1,890 $ 162,000 Aug 1,200 $ 112,000 Sep 1,210 $ 130,000 Oct 1,600 $ 143,000 Nov 1,700 $ 148,000 Dec 1,850 $ 143,000