As explained in the previous chapter, when costs are neither purely variable nor purely fixed, we must identify and separate those variable and fixed components to be able to incorporate them into our cost-volume-profit analysis. The least squares method is a more precise mathematical approach to accomplish that objective. Let’s expand on the example of Bob’s Appliances. Over the past several years, Bob’s volume of deliveries and delivery costs has varied from year to year as shown in Table 9.1, Deliveries and Costs.
Notice that the last 2 years contain the same data we used in the high-low method to determine the variable delivery cost per unit ($7.50) and the fixed delivery cost per year ($1,450).
To find the ...
Get Breakeven Analysis now with the O’Reilly learning platform.
O’Reilly members experience books, live events, courses curated by job role, and more from O’Reilly and nearly 200 top publishers.
