The following data has been assembled for Yippee Company. Use the high- low method. $$\begin{array} { l l }
\text { Cost } & \text { Hours } \
\$ 24,400 & 2,000 \
34,000 & 2,600 \
31,280 & 2,450 \
36,400 & 3,000 \
44,160 & 3,900
\end{array}$$ The cost function is stated as:
A) Y = $3,600 + $10.40X
B) Y = $21,360 + $1.52X
C) Y = $10,112 + $8.64X
D) Y = $26,672 + $1.84X

Question

The following data has been assembled for Yippee Company. Use the high- low method. $$\begin{array} { l l } 
\text { Cost } & \text { Hours } \
\$ 24,400 & 2,000 \
34,000 & 2,600 \
31,280 & 2,450 \
36,400 & 3,000 \
44,160 & 3,900
\end{array}$$ The cost function is stated as:
A) Y = $3,600 + $10.40X
B) Y = $21,360 + $1.52X
C) Y = $10,112 + $8.64X
D) Y = $26,672 + $1.84X

Quizplus · Accepted Answer

The high-low method uses the highest and lowest activity levels to estimate the variable cost per unit and fixed costs. The variable cost per hour is calculated as (44,160 - 24,400) / (3,900 - 2,000) = $10.40. The fixed cost is calculated using one of the points, e.g., 24,400 = Fixed Cost + 10.40 * 2,000, giving a fixed cost of $3,600. Thus, the cost function is Y = $3,600 + $10.40X.

The Following Data Has Been Assembled for Yippee Company The Cost Function Is Stated As: A) Y = $3,600

The Following Data Has Been Assembled for Yippee Company The Cost Function Is Stated As:
A) Y = $3,600