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Lynsay Detz is examining customer-service costs in the southern region of Clancey Products. Clancey Products...

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Accounting

Lynsay Detz is examining customer-service costs in the southern region of Clancey Products. Clancey Products has more than 200 separate electrical products that are sold with a 6-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:

Week Customer-Service Department Costs Number of Service Reports

1 $13,400 210

2 20,200 300

3 11,300 130

4 18,900 385

5 14,700 285

6 22,500 450

7 16,300 330

8 21,600 310

Required

1. Plot the relationship between customer-service costs and number of service reports. Is the relationship economically plausible?

2. Use the high-low method to compute the cost function relating customer-service costs to the number of service reports.

3. What variables, in addition to number of service reports, might be cost drivers of weekly customer-service costs of Clancey Products?

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