The Management of Ferriman Corporation Would Like to Better Understand

Essay

The management of Ferriman Corporation would like to better understand the behavior of the company's warranty costs.Those costs are listed below for a number of recent months: $\begin{array}{lcc}&\text { Product Returns } & \text { Warranty Cost } \\\text {April }&24 & \$ 2,972 \\\text { May.}&23 & \$ 2,928 \\\text { June.}&27 & \$ 3,141 \\\text {July }&39 & \$ 3,752 \\\text {August }&36 & \$ 3,569 \\\text {September }&35 & \$ 3,551 \\\text { October}&26 & \$ 3,071 \\\text { November.}&37 & \$ 3,636\end{array}$ Management believes that warranty cost is a mixed cost that depends on the number of product returns.
Required:
Estimate the variable cost per product return and the fixed cost per month using the least-squares regression method.