If the controller uses the high-low method to estimate costs,the cost equation for electricity cost is:
A)Cost = $3,726.88 + $5.77 $\times$ Machine-hours.
B)Cost = $1,625.00 + $6.25 $\times$ Machine-hours.
C)Cost = $6.90 $\times$ Machine-hours.
D)Cost = $22,825.

Question

Quizplus · Accepted Answer

The high-low method involves selecting the highest and lowest levels of activity and calculating the cost per unit of activity. In this case, the high and low levels of machine-hours are given as 260 and 80, respectively, with corresponding electricity costs of $1,625 and $450. Using these values, we can calculate the variable cost per machine-hour as (1,625-450)/(260-80) = $6.25. The fixed cost component can then be calculated using either the high or low point, giving us a fixed cost of $1,000. Therefore, the cost equation is Cost = $1,000 + $6.25F1F1F1S1×F1F1F10 Machine-hours.

If the Controller Uses the High-Low Method to Estimate Costs,the ×\times×

If the Controller Uses the High-Low Method to Estimate Costs,the $\times$