From April 1 through October 31, Coles County Highway Department hires temporary employees to mow and clean the right-of-way along county roads. The County Road Commissioner has asked you to help her in determining the variable labor cost of mowing and cleaning a mile of road. The following information is available regarding current-year operations:
From April 1 through October 31, Coles County Highway Department hires temporary employees to mow and clean the right-of-way along county roads. The County Road Commissioner has asked you to help her in determining the variable labor cost of mowing and cleaning a mile of road. The following information is available regarding current-year operations:
Managerial Economics: A Problem Solving Approach
5th Edition
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Chapter4: Extent (how Much) Decisions
Section: Chapter Questions
Problem 3MC
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Transcribed Image Text:Scatter Diagrams and High-Low Cost Estimation
From April 1 through October 31, Coles County Highway Department hires temporary employees to mow and clean the right-of-way along county roads. The County Road Commissioner has asked
you to help her in determining the variable labor cost of mowing and cleaning a mile of road. The following information is available regarding current-year operations:
Miles Mowed Labor
Month
and Cleaned Costs
April
240 S6,800
May
305 7,680
June
325
8,310
July
275
7,200
August
220
6,550
September
200
5,760
Оctober
75 4,960
Use the information from the high- and low-volume months to develop a cost-estimating equation for monthly labor costs.
Monthly labor costs - $
3,955 v + $
13.4 v X
Plot the data on a scatter diagram. Using the information from representative high- and low volume months, use the high-low method to develop a cost-estimating equation for monthly labor costs.
Monthly labor costs - $
9,181 x + $
13.4 x x
Adjust the equation developed in requirement (b) to incorporate the effect of an anticipated 5% increase in wages.
Monthly labor costs - $
4,800 x + $
13.45 x X
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