This scattergraph reveals several interesting points about the behavior of overhead costs:
The quick-and-dirty method based on the scattergraph is probably better than the high-low method in this situation and should give acceptable estimates of the fixed and variable components of overhead expenses. The estimates should be fairly close (within the inherent imprecision of the method) to the estimates that would result from using least-squares regression.
• Using statistical software, the least-squares regression method yields estimates of $3.95 per labor hour for the variable cost and $48,126 per month for the fixed cost. The adjusted R2 is 96%.