Super Limited has more than 20 separate electronic products that are sold with a

Question

Super Limited has more than 20 separate electronic products that are sold with a six-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: Customer-Service Department Costs $54,800 83,600 52,000 75,200 56,000 86,000 Week Number of Service Reports 190 275 115 395 265 455

Explanation / Answer

a) The highest level of activity is in week 6 for 455 service reports and the lowest level of activity is in week 3 for 115 service reports. The corresponding cost for 455 service reports is $86,000 and the cost for 115 service reports is $52,000.

Slope (b) = (86,000-52,000)/(455-115) = $34,000/340 = $100 per service reports

Fixed cost (a) = 86,000 - (455*100) = $86,000-$45,500 = $40,500

Cost function, y = $40,500+$100x (y = a+bx)

b) In addition to the number of service reports, the number of repairs and the number of replacement for each product might be the cost drivers of weekly customer service costs of Super Limited.

c) In estimating the cost function above in part a) assumptions are made which is mentioned as follows:-

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.