When analyzing a mixed cost, you should always plot the data in a scattergraph, but it is particularly important to check the data visually on a scattergraph when the R² from a least squares regression is low. A quick look at the scattergraph can reveal that there is little relation between the cost and the activity or that the relation is something other than a simple straight line.

Question

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When the R² is low, it indicates a weak relationship between the cost and the activity. Therefore, it is important to visually analyze the data on a scattergraph to ensure there is a meaningful relationship and to identify any potential nonlinearities or outliers.

When Analyzing a Mixed Cost, You Should Always Plot the Data