| High-Low Method, Scattergraph, Break-Even Analysis [LO 2, 3] FirstTown Mortgage specializes in providing mortgage refinance loans. Each loan customer is charged a $500 loan processing fee by FirstTown when the loan is processed. FirstTown's costs over the past year associated with processing the loans follow: | Loans Processed | Cost | January | 190 | $50,030 | February | 170 | 48,550 | March | 200 | 50,810 | April | 211 | 51,012 | May | 235 | 52,012 | June | 285 | 54,530 | July | 310 | 55,725 | August | 240 | 54,420 | September | 219 | 51,180 | October | 185 | 49,700 | November | 175 | 49,000 | December | 180 | 49,290 | | | Required a. | Use the high-low method to estimate fixed and variable costs. | b. | Based on these estimates, calculate the number of loans that must be made to break even. (Round to the nearest whole unit.) | c. | Estimate total profit in a month when 275 loans are processed. (Round to the nearest dollar.) | d. | Prepare a scattergraph of loan processing cost (vertical axis) and number of loans processed (horizontal axis). | e. | Comment on whether the high-low method produces a reasonable estimate of costs. Look at whether the relationship between the number of loans processed and the cost is linear. Are there any outliers? Does an outlier affect the high-low estimate? | |