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Type or paste question here 2.17 Cost function using high-low and regression; quality of cost estimates Following are sales and administrative cost data for Big
Type or paste question here
2.17 Cost function using high-low and regression; quality of cost estimates Following are sales and administrative cost data for Big Jack Burgers for four months: September October November December Sales $ 632100 842500 1 087900 1 132100 Administrative costs $43 333 57770 62 800 68333 Administrative cost is a mixed cost, and sales is a potential cost driver. Required (a) (b) (c) (d) (e) (f) Using the high-low method, create a cost function for administrative costs. In your own words, explain why the high-low method might not be a good method for estimating the cost function. Create a scatter plot and add a trend line. After examining the plot, use your judgement to determine whether the cost is fixed, variable, or mixed. Perform regression analysis to create a cost function for admlnistrative costs. Can we know for certain that the cost function from part (d) provides a good estimate for next month's administrative costs? Why or why not? Discuss whether sales are an economically plausible driver for administration costs for Big Jack Burgers. (L04, L05)
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