Scatter Diagrams and High-Low Cost Estimation

Assume the local Pearle Vision has the following information on the number of sales orders received and order-processing costs.

MonthSales OrdersOrder-Processing Costs13,000$ 165,40021,500100,75034,400241,40042,800163,80052,300139,55061,20086,20072,000125,000

Required

(a.) Use information from the high- and low-volume months to develop a cost-estimating equation for monthly order-processing costs.

Answer

Answer

(b.) Plot the data on a scatter diagram. Using the information from representative high-and low-volume months, develop a cost estimating equation for monthly production costs.If needed, an Excel worksheet is provided in the following link in order to create the scatter diagram