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Cornerstones of Cost Management 2nd Edition by Don Hansen ,Maryanne Mowen
Edition 2ISBN: 978-1111824402Cornerstones of Cost Management 2nd Edition by Don Hansen ,Maryanne Mowen
Edition 2ISBN: 978-1111824402 Exercise 14
Scattergraph Method, High-Low Method
Deepa Dalai opened a free-standing radiology clinic. She had anticipated that the costs for the V-J radiological tests would be primarily fixed, but she found that costs increased with the number of tests performed. Costs for this service over the past nine months are as follows:
Required:
1. Prepare a scattergraph based on the preceding data. Use cost for the vertical axis and number of radiology tests for the horizontal axis. Based on an examination of the scattergraph, does there appear to be a linear relationship between the cost of radiology service and the number of tests?
2. Compute the cost formula for radiology services using the high-low method.
3. Calculate the predicted cost of radiology services for October for 3,500 tests using the formula found in Requirement 2.
Deepa Dalai opened a free-standing radiology clinic. She had anticipated that the costs for the V-J radiological tests would be primarily fixed, but she found that costs increased with the number of tests performed. Costs for this service over the past nine months are as follows:
Required:
1. Prepare a scattergraph based on the preceding data. Use cost for the vertical axis and number of radiology tests for the horizontal axis. Based on an examination of the scattergraph, does there appear to be a linear relationship between the cost of radiology service and the number of tests?
2. Compute the cost formula for radiology services using the high-low method.
3. Calculate the predicted cost of radiology services for October for 3,500 tests using the formula found in Requirement 2.
Explanation
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Cornerstones of Cost Management 2nd Edition by Don Hansen ,Maryanne Mowen
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