The managers of Sandpiper Company asked for a new cost study to improve next year’s budget forecasts. The following data were taken
from cost records and activity reports for the shipping department. The data reflect daily activity for the past two weeks. The shipping
department does not have its own delivery trucks. Instead, the firm contracts for the use of trucks and drivers as needed on a daily basis from
a delivery service. Shipping supplies include the cost of several items such as boxes, tape, packing materials, and labels.
REQUIRED:
• A. Plot delivery services costs against units shipped. Plot shipping supplies cost against units shipped. Analyze each plot and
determine whether the cost is mixed, fixed, or variable. If the cost is fixed, estimate an average fixed cost for each relevant range. If
the cost is mixed, use the high–low method or regression analysis to estimate the cost function.
• B. Using the cost function you estimated in part (A), estimate delivery service cost when the company ships 1,500, 2,500, and
3,500 units daily.
• C. Using the cost function you estimated in part (A), estimate shipping supplies cost when the company ships 1,500, 2,500, and
3,500 units daily
