Scattergraph Method

A A A

DEFINITION

A visual technique for separating the fixed and variable elements of a semi-variable expense (also called a mixed expense) in order to estimate and budget for future costs. A scattergraph is made up of a horizontal x axis that represents production activity, a vertical y axis that represents cost, data that are plotted as points on the graph and a regression line that runs through the dots which represents the relationship between the variables.

INVESTOPEDIA EXPLAINS

Business managers use the scattergraph method in cost estimation to anticipate operating costs at different activity levels. The method gets its name from the overall image of the graph, which consists of many scattered dots. While the method is simple, it is also imprecise. Alternate methods of cost estimation include the high-low method, account analysis and least squares.


RELATED TERMS
  1. Least Squares

    A statistical method used to determine a line of best fit by minimizing the ...
  2. High-Low Method

    In cost accounting, a way of attempting to separate out fixed and variable costs ...
  3. Operating Cost

    Expenses associated with administering a business on a day to day basis. Operating ...
  4. Fixed Cost

    A cost that does not change with an increase or decrease in the amount of goods ...
  5. Risk Graph

    A two-dimensional graphical representation that displays the profit or loss ...
  6. Risk Management

    The process of identification, analysis and either acceptance or mitigation ...
  7. Compound Annual Growth Rate - CAGR

    The year-over-year growth rate of an investment over a specified period of time. ...
  8. Earnings Per Share - EPS

    The portion of a company's profit allocated to each outstanding share of common ...
  9. Billing Cycle

    The interval of time during which bills are prepared for goods and services ...
  10. Amortization

    1. The paying off of debt in regular installments over a period of time. 2. ...
Related Articles
  1. Analyze Cash Flow The Easy Way
    Fundamental Analysis

    Analyze Cash Flow The Easy Way

  2. Analyzing Operating Margins
    Fundamental Analysis

    Analyzing Operating Margins

  3. A Look At Corporate Profit Margins
    Markets

    A Look At Corporate Profit Margins

  4. Zooming In On Net Operating Income
    Investing

    Zooming In On Net Operating Income

  5. Free On Board
    Professionals

    Free On Board

  6. What are the odds of getting a perfect ...
    Personal Finance

    What are the odds of getting a perfect ...

  7. An Introduction To The CMA Designation
    Professionals

    An Introduction To The CMA Designation

  8. Top 4 Most Competitive Financial Careers
    Professionals

    Top 4 Most Competitive Financial Careers

  9. Operating Profit
    Investing

    Operating Profit

  10. What's the difference between Bollinger ...
    Technical Indicators

    What's the difference between Bollinger ...

comments powered by Disqus
Hot Definitions
  1. Amplitude

    The difference in price from the midpoint of a trough to the midpoint of a peak of a security. Amplitude is positive when calculating a bullish retracement (when calculating from trough to peak) and negative when calculating a bearish retracement (when calculating from peak to trough).
  2. Ascending Triangle

    A bullish chart pattern used in technical analysis that is easily recognizable by the distinct shape created by two trendlines. In an ascending triangle, one trendline is drawn horizontally at a level that has historically prevented the price from heading higher, while the second trendline connects a series of increasing troughs.
  3. National Best Bid and Offer - NBBO

    A term applying to the SEC requirement that brokers must guarantee customers the best available ask price when they buy securities and the best available bid price when they sell securities.
  4. Maintenance Margin

    The minimum amount of equity that must be maintained in a margin account. In the context of the NYSE and FINRA, after an investor has bought securities on margin, the minimum required level of margin is 25% of the total market value of the securities in the margin account.
  5. Leased Bank Guarantee

    A bank guarantee that is leased to a third party for a specific fee. The issuing bank will conduct due diligence on the creditworthiness of the customer looking to secure a bank guarantee, then lease a guarantee to that customer for a set amount of money and over a set period of time, typically less than two years.
  6. Degree Of Financial Leverage - DFL

    A ratio that measures the sensitivity of a company’s earnings per share (EPS) to fluctuations in its operating income, as a result of changes in its capital structure. Degree of Financial Leverage (DFL) measures the percentage change in EPS for a unit change in earnings before interest and taxes (EBIT).
Trading Center