Scattergraph Method

AAA

DEFINITION of 'Scattergraph Method'

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 'Scattergraph Method'

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 ...
  2. High-Low Method

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

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

    A cost that does not change with an increase or decrease in the ...
  5. Risk Management

    The process of identification, analysis and either acceptance ...
  6. Risk Graph

    A two-dimensional graphical representation that displays the ...
Related Articles
  1. Investing

    Zooming In On Net Operating Income

    NOI is a long-run profitability measure that smart investors can count on.
  2. Markets

    A Look At Corporate Profit Margins

    Take a deeper look at a company's profitability with the help of profit margin ratios.
  3. Fundamental Analysis

    Analyze Cash Flow The Easy Way

    Find out how to analyze the way a company spends its money to determine whether there will be any money left for investors.
  4. Fundamental Analysis

    Analyzing Operating Margins

    Find out how to put this important component of equity analysis to work for you.
  5. Fundamental Analysis

    What's a Tangible Asset?

    Tangible assets are property owned by a business that can be touched -- they physically exist. Examples include furniture and fixtures, computer hardware, delivery equipment, leasehold improvements ...
  6. Fundamental Analysis

    Cash Flow From Operating Activities

    Cash flow from operating activities is a section of the Statement of Cash Flows that is included in a company’s financial statements after the balance sheet and income statements.
  7. Fundamental Analysis

    What are the most common issues with Serial Correlation in stocks?

    Read about the concept of serial correlation in stock returns, and learn why market analysts are divided about the efficacy of trading based on stock patterns.
  8. Fundamental Analysis

    What are the components of shareholders' equity?

    Understanding company valuation figures, such as shareholders' equity, can be a powerful tool in assessing the financial strength of a business.
  9. Fundamental Analysis

    What is the difference between the acid test ratio and working capital ratio?

    Using liquidity ratios to determine the financial stability of a company is an important tool to accounting professionals and investors.
  10. Fundamental Analysis

    What are some examples of return on investment capital?

    Read about some basic examples of return on investment capital for publicly traded companies and companies that have a handful of investors.

You May Also Like

Hot Definitions
  1. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
  2. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
  3. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
  4. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
  5. Break-Even Analysis

    An analysis to determine the point at which revenue received equals the costs associated with receiving the revenue. Break-even ...
  6. Key Performance Indicators - KPI

    A set of quantifiable measures that a company or industry uses to gauge or compare performance in terms of meeting their ...
Trading Center