Asked by Andres Velazquez on May 01, 2024
Verified
Grawburg Inc.maintains a call center to take orders, answer questions, and handle complaints.The costs of the call center for a number of recent months are listed below: Management believes that the cost of the call center is a mixed cost that depends on the number of calls taken.
Required:
Estimate the variable cost per call and fixed cost per month using the least-squares regression method.
Call Center
A centralized office used for receiving or transmitting a large volume of requests by telephone, often involving customer service or technical support.
Mixed Cost
An expense that has both fixed and variable components, changing in total with the level of activity but not in direct proportion.
Least-squares Regression
A statistical method used to determine the line of best fit by minimizing the sum of squares of the differences between observed values and those predicted by a linear function.
- Familiarize oneself with the least-squares regression method and deploy it for the analysis of cost behavior.
- Differentiate between the characteristics of variable, fixed, and mixed costs.
- Work out the expense of variables for every unit or activity.
Verified Answer
Variable cost per call = Slope = $3.27
Fixed cost per month = Intercept = $82,758
Learning Objectives
- Familiarize oneself with the least-squares regression method and deploy it for the analysis of cost behavior.
- Differentiate between the characteristics of variable, fixed, and mixed costs.
- Work out the expense of variables for every unit or activity.
Related questions
Using the Least-Squares Regression Method, the Estimate of the Variable ...
Using the High-Low Method of Analysis, the Estimated Variable Lubrication ...
The Accounting Department of Archer Company, a Merchandising Company, Has ...
Which of the Following Is Not a Mixed Cost ...
Variable Costs Are Costs That Remain Constant in Total Dollar ...