37. Scattergraph Method. Castilla Company produces smartphones. Management wants to estimate the cost of production equipment used to produce smartphones. The company reported the following monthly cost data related to production equipment (this is the same data as the previous exercise): Reporting Period (Month) Total Costs Machine Hours January $920,000 45,000 February 600,000 25,000 March 500,000 20,000 April 1,100,000 90,000 1,140,000 95,000 June 620,000 30,000 July 880,000 38,000 August 910,000 48,000 September 1,060,000 78,000 October 960,000 51,000 November 1,400,000 96,000 May December 980,000 54,000 Required: a. Use the five steps of the scattergraph method to estimate the total fixed cost per month and the variable cost per machine hour. State your results in the cost equation form Y=f + vX by filling in the dollar amounts for f and v. b. What would Castilla Company's estimated costs be if it used 50,000 machine hours next month? c. What would Castilla Company's estimated costs be if it used 15,000 machine hours next month? a. 37. Scattergraph Method Answers will vary depending on where the cost line is visually fit to the data points. The five steps are shown below. Step 1: Fill in the columns below to plot the data points in the graph that follows. (Points will automatically appear in the graph after you enter the data points below). Reporting Answer for Answer for Period Total Machine Total Costs Machine (Month) Costs Hours is: Hours is: January $ 920,000 45,000 Correct Correct February Incorrect Incorrect You are not required to draw March Incorrect Incorrect the best fitting line below. April Incorrect Incorrect Information is given on the May Incorrect Incorrect next worksheet to enable June Incorrect Incorrect you to finish the exercise July Incorrect Incorrect without completing this step. August Incorrect Incorrect September Incorrect Incorrect October Incorrect Incorrect November Incorrect Incorrect December Incorrect Incorrect Step 2: Visually fit a line to the data points and make sure the line touches on data point. Total Costs Machine Hours 37. Round v to the nearest cent and all other a. Scattergraph Method (continued) amounts to the nearest dollar. Step 3: Estimate the total fixed costs (). Assume your estimate for total fixed costs is $450,000. Step 4: Calculate the variable cost per unit (v); units are measured in machine hours. From part a above, assume your estimate for total fixed costs is $450,000, and that your line in step 2 went through the data point with total costs of $1,060,000 and 78,000 machine hours (September data point). Calculate the variable cost per unit rounded to the nearest cent and input your answer below. Y -Variable cost per unit (rounded to the nearest cent) Step 5: State the results in equation form Y - [ +vX. x b. Using the equation from above, substitute machine hours for X and solve for Y: Y Y hours) c. Using the equation from part a, substitute machine hours for X and solve for Y: Y hours ) Y
