Question 3 - Cost Behaviour [20 Marks] Megan Supplies Ltd is a wholesaler for a large variety of plumbing supplies. The company's accountant, Hannah, has recently completed a cost study of the firm's Shipping Department in which he used the kilograms of supplies loaded or unloaded at the company's loading dock to quantify the department's activity. Washer compiled the following data Month Kilograms of supplies Shipping unloaded or loaded Department costs January 3 600 $ 23 400 February 3 200 22 600 March 2 600 22 500 April 2 000 20 400 May 4 400 22 200 June 4 800 25 100 July 4 000 24 000 August 3 600 22 800 September 5 200 27 240 October 2 200 22 100 November 2 400 22 700 December 2 800 22 700 Required: 1. Draw a scatter diagram of the cost data for the Shipping Department. [2 Marks] 2. Estimate the Shipping Department's cost behaviour using the high-low method. Use an equation to express the results of this estimation method. [5 Marks] 3. Using the equations estimated in Part 2 predict the Shipping Department's costs for a month when loads totalling 4500 kilograms are moved. [2 Marks] 4. Prepare least squares regression analysis to estimate the variable and fixed components for the Shipping Department costs. [5 Marks] 5. Based on your spreadsheet write the least squares regression equation for the Department's costs. [2 Marks] 6. Using the equation from Part 5, predict the firm's Shipping Department's costs for a month when loads totalling 4500 kilograms are moved. [2 Marks] 7. Why do these cost predictions estimated using the high-low and regression methods differ? Which method do you recommend? Explain your answer. [2 Marks]