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### Financial & Managerial Accounting

Book edition 7th
Author(s) John J Wild, Ken W. Shaw, Barbara Chiappetta
Pages 1096 pages
ISBN 9781259726705

# A company reports the following information about its unit sales and its cost of sales. Each unit sells for $500. Use these data to prepare a scatter diagram. Draw an estimated line of cost behavior and determine whether the cost appears to be variable, fixed, or mixed.PeriodUnit salesCost of salesPeriod Unit salesCost of sales122,500$15,150411,250$8,250217,25011,250513,500$9,000315,75010,500618,750\$14,250

The cost appears to be curvilinear because it is not increasing at a constant rate.

See the step by step solution

## Step 1: Definition of Scatter Diagram

The diagram under which the data related to cost and the units manufactured is plotted on the graph is known as a scatter diagram.

## Step 3: Classification of cost

The above cost cannot be classified as fixed because it is increasing as the production does and also it is not increasing at a constant rate therefore, it is not a variable cost. It is a curvilinear cost because the cost is increasing as per the volume of production but not at a constant rate.