The town of Jim Thorpe, Pennsylvania operates a scenic railway business for tourists. The town is trying to create a cost function for labor costs, which has been identified as a mixed cost, associated with operating the railway. The following data has been gathered related to the labor costs and two possible cost drivers, the number of trips and gross ticket revenues by month.
Required:
a. Using the high-low method, determine the cost function for labor costs using (1) Number of Trips as a cost driver, and (2) Ticket Revenues as a cost driver.
b. Prepare a scatter plot for labor costs using (1) Number of Trips as a cost driver, and (2) Ticket Revenues as a cost driver using the templates below. Based on the scatter plot, which appears to be a more relevant cost driver?
(1)

(2)

Question

The town of Jim Thorpe, Pennsylvania operates a scenic railway business for tourists. The town is trying to create a cost function for labor costs, which has been identified as a mixed cost, associated with operating the railway. The following data has been gathered related to the labor costs and two possible cost drivers, the number of trips and gross ticket revenues by month. 
  Required: 
a. Using the high-low method, determine the cost function for labor costs using (1) Number of Trips as a cost driver, and (2) Ticket Revenues as a cost driver.
b. Prepare a scatter plot for labor costs using (1) Number of Trips as a cost driver, and (2) Ticket Revenues as a cost driver using the templates below. Based on the scatter plot, which appears to be a more relevant cost driver?
(1)

(2)

Quizplus · Accepted Answer

The Answer of The town of Jim Thorpe, Pennsylvania operates a scenic railway business for tourists. The town is trying to create a cost function for labor costs, which has been identified as a mixed cost, associated with operating the railway. The following data has been gathered related to the labor costs and two possible cost drivers, the number of trips and gross ticket revenues by month. 
  Required: 
a. Using the high-low method, determine the cost function for labor costs using (1) Number of Trips as a cost driver, and (2) Ticket Revenues as a cost driver.
b. Prepare a scatter plot for labor costs using (1) Number of Trips as a cost driver, and (2) Ticket Revenues as a cost driver using the templates below. Based on the scatter plot, which appears to be a more relevant cost driver?
(1)

(2)

The Town of Jim Thorpe, Pennsylvania Operates a Scenic Railway