The Fuller Company has assembled the following data pertaining to certain costs which cannot be easily identified as either fixed or variable. Fuller has heard about two methods of developing cost functions called the high-low method & scattergram method and has decided to compare both methods.

The table below shows monthly data collected on costs and on the number of hours worked over a recent 12-month period.

Costs # of Hours

37,000 3,700

23,000 1,600

37,000 4,100

47,000 4,900

33,000 3,300

39,000 4,400

32,000 3,500

33,000 4,000

17,000 1,200

18,000 1,300

22,000 1,800

20,000 1,600

a) Determine the variable cost per hour and the fixed cost using the high-low method.

b) What is the equation of the total mixed cost function?

c) Prepare the scatter diagram, clearly showing any outliers.

d) Using the line of best-fit, determine Fullers fixed cost per month and the variable cost per hour. (Use 0 & 3000 hours.)

e) In view of Fullers cost behaviour pattern, which of the two methods appear more appropriate? Explain your answer.