Scatter graph

Definition

A scatter graph is a visual representation of the relationship between two variables using Cartesian coordinates. It plots individual data points to help identify trends or patterns, such as linear relationships in cost behavior analysis.

5 Must Know Facts For Your Next Test

1. Scatter graphs are used to visually assess the relationship between variables, helping to estimate fixed and variable costs.
2. The independent variable is typically plotted on the x-axis while the dependent variable is plotted on the y-axis.
3. A trend line, also known as a line of best fit, can be drawn through the data points to approximate the underlying relationship.
4. Scatter graphs can reveal outliers or anomalies that may impact cost estimations.
5. They are particularly useful for identifying whether a linear cost function (y = mx + b) fits the data well.

Review Questions

• What type of information does a scatter graph provide in managerial accounting?
• Why might an analyst use a scatter graph when estimating future costs?
• How can you identify outliers using a scatter graph?

Related terms

Trend Line: A line added to a scatter graph that best represents the data points' overall direction.

Outlier: An observation point that is distant from other observations and may affect statistical calculations.

Cost Behavior: The way in which costs change in response to changes in business activity levels.