Presented below is the production data for the first six months of the year showing the mixed costs incurred by Andrew Company. $$\begin{array} { l c c }
\text { Month } & \underline { \text { Cost } } & \underline { \text { Units } } \
\text { July } & \$ 5,890 & 4,100 \
\text { August } & 4,024 & 3,200 \
\text { September } & 7,480 & 6,300 \
\text { October } & 8,840 & 7,500 \
\text { November } & 5,800 & 5,800 \
\text { December } & 7,336 & 6,600
\end{array}$$ Andrew Company uses the high?low method to analyze mixed costs.The cost function is stated as _____.
A)Y = $440 + $1.12X
B)Y = $3,562.30 + $0.144X
C)Y = $107.20 + $1.416X
D)Y = $7,850 + $0.132X

Question

Presented below is the production data for the first six months of the year showing the mixed costs incurred by Andrew Company. $$\begin{array} { l c c } 
\text { Month } & \underline { \text { Cost } } & \underline { \text { Units } } \
\text { July } & \$ 5,890 & 4,100 \
\text { August } & 4,024 & 3,200 \
\text { September } & 7,480 & 6,300 \
\text { October } & 8,840 & 7,500 \
\text { November } & 5,800 & 5,800 \
\text { December } & 7,336 & 6,600
\end{array}$$ Andrew Company uses the high?low method to analyze mixed costs.The cost function is stated as _____.
A)Y = $440 + $1.12X
B)Y = $3,562.30 + $0.144X
C)Y = $107.20 + $1.416X
D)Y = $7,850 + $0.132X

Quizplus · Accepted Answer

The high-low method involves identifying the highest and lowest levels of activity and their associated costs to determine the variable cost per unit and the fixed cost. Here, the highest level of activity is in October (7,500 units) with a cost of $8,840, and the lowest level of activity is in August (3,200 units) with a cost of $4,024. The variable cost per unit is calculated as the change in cost divided by the change in units, which is ($8,840 - $4,024) / (7,500 - 3,200) = $4,816 / 4,300 = $1.12 per unit. To find the fixed cost, we substitute the variable cost and either the high or low point into the cost equation (Y = Fixed Cost + Variable Cost * X). Using the high point, $8,840 = Fixed Cost + $1.12 * 7,500. Solving for Fixed Cost gives $8,840 - $8,400 = $440. Therefore, the cost function is Y = $440 + $1.12X.

Presented Below Is the Production Data for the First Six