Cost 10!J D Problem 3-27 Scattergraph, High-Low Method, and Predicting Time Period from the One Used to Develop a Cost Formula Farnsworth Company has gathered data on its overhead activities and associated costs for the past 10 months. Tracy Heppler, a member of the controller's department, has convinced manage. ment that overhead costs can be better estimated and controlled if the fixed and variable compo- nents of each overhead activity are known. One such activity is receiving raw materials (unloading incoming goods, counting goods, and inspecting goods), which she believes is driven by the num- ber of receiving orders. Ten months of data have been gathered for the receiving activity and ane as tollows: Month Receiving Orders Receiving Cost (S) 27 1,200 1,300 1.100 1,600 400 42,000 25,500 37,500 31.500 43,500 10 Required: 1. Prepare a scattergraph based on the 10 months of data. Does the relationship appear to be linear? Using the high-low method, prepare a cost formula for the receiving activity. Using this for- mula, what is the predicted cost of receiving for a month in which 1,450 receiving orders are processed? Prepare a cost formula for the receiving activity for a quarter. Based on this formula, what is the predicted cost of receiving for a quarter in which 4,650 receiving orders are anticipated? Prepare a cost formula for the receiving activity for a year. Based on this formula, what is the predicted cost of receiving for a year in which 18,000 receiving orders are anticipated? 2. Check figures: 2. Fixed receiving cost3. S9.900 3. Receiving cost for the year $442,800