Using a Scattergraph Plot to Analyze Cost Behavior: Diagnosing Fixed and Variable Costs, Slides of Management Accounting

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Learning Objective 2

Use a scattergraph plot to

diagnose cost behavior.

Plot the data points on a graph

(total cost vs. activity).

Maintenance Cost1,000’s of Dollars

Patient-days in 1,000’s

X

Y

Use one data point to estimate the total level of activity and the total cost.

Intercept = Fixed cost: $10,

Maintenance Cost1,000’s of Dollars

Patient-days in 1,000’s

X

Y

Patient days = 800

Total maintenance cost = $11,

Make a quick estimate of variable cost per unit and determine the cost equation.

Variable cost per unit = $1,000 800 = $1.25/patient-day

Y = $10,000 + $1.25X

Total maintenance at 800 patients $ 11, Less: Fixed cost 10, Estimated total variable cost for 800 patients $ 1,

Total maintenance cost Number of patient days