a 4600 54000 3500 53000 52500 2000 1500 1co0 3500 S0 4500 54

a) $4,600 54,000 3,500 53,000 52,500 $2,000 $1,500 $1,co0 3500 S0 $4,500 54,000 53.000 52,500 $2.000 51,500 $1,000 $500 S0 2,000 4,000 6,000 8,000 10,000 2,000 4,000 6,0 8,000 10,000 Labor Hours Labor Hours $4,500 54.000 S3,500 53,000 52,500 $2.000 51,500 $1,000 $500 $0 34,500 54,000 $3,500 53,000 52,500 $2,000 $1,500 $1,000 SD 2,000 4,000 6,000 8,000 10,000 2,000 4,000 6,000 8,000 10,000 Labor Hours Labor Hours Which of the scattergraph plots above suggests a mixed cost relationship between direct labor-hours and manufacturing overhead?

Solution

Solution - (b) Graph

Scatter graph (b) Suggest a mixed cost relationship between direct labour hours and manufacturing overhead.

Since in this graph, as the direcr labour hours increases, mixed cost (Variable + Fixed) also increases.

In case of mixed cost, if there is increase in direct labour hours, mixed will also increase due to inclusion of variable portion in it.

Graph (a) - Not suggested since in this diagram, at 2000 labour hours, mixed cost is $3000 and 10000 labour hours,variable cost is $2000. That is not Possible

Graph (c) - Not suggested, since as per this graph, as the direct labour hours increase, cost will decrease. This is not possible

Graph (d) - Not suggested since in this case also there is reverse trend of mixed cost. This is not possible.