Discussion Question

The table below shows monthly data collected on production costs and on the number of units produced over a twelve month period.

Month	Total Production Costs	Level of Activity (Units Produced)
July	$230,000	3,500
August	250,000	3,750
September	260,000	3,800
October	220,000	3,400
November	340,000	5,800
December	330,000	5,500
January	200,000	2,900
February	210,000	3,300
March	240,000	3,600
April	380,000	5,900
May	350,000	5,600
June	290,000	5,000

1. Determine the variable cost per unit and the fixed cost using the high-low method.

2. What is the equation of the total mixed cost function?

3. Prepare the scatter diagram, clearly showing any outliers.
4. Using the line of best-fit, determine the companys fixed cost per month and the variable cost per unit. (Use 0 & 5,000 units.)

5. In view of the departments cost behaviour pattern, which of the two methods appear more appropriate? Explain your answer.