Business, 11.02.2020 22:07 grosst4333

Estimating a cost function, high-low method. Laurie Daley is examining customer-service costs in the southern region of Capitol Products. Capitol Products has more than 200 separate electrical products that are sold with a 6-month guarantee of full repair or replacement with a new product. When a product is returned by a customer, a service report is prepared. This service report includes details of the problem and the time and cost of resolving the problem. Weekly data for the most recent 8-week period are as follows:

Week Customer-Service Department Costs Number of Service Reports
1 $13,700 190
2 20,900 275
3 13,000 115
4 18,800 395
5 14,000 265
6 21,500 455
7 16,900 340
8 21,000 305

1. Plot the relationship between customer-service costs and number of service reports. Is the relationship economically plausible?
2. Use the high-low method to compute the cost function, relating customer-service costs to the number of service reports.
3. What variables, in addition to number of service reports, might be cost drivers of weekly customer service costs of Capitol Products?

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Estimating a cost function, high-low method. Laurie Daley is examining customer-service costs in the...

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