Quantum Company uses the high-low method to estimate the cost function. The information for 2017 is provided below:

What is the estimated total cost when 450 machine-hours are used?
A) $63,000
B) $32,000
C) $18,000
D) $23,625

Question

Quantum Company uses the high-low method to estimate the cost function. The information for 2017 is provided below:

What is the estimated total cost when 450 machine-hours are used?
A) $63,000 
B) $32,000 
C) $18,000 
D) $23,625

Quizplus · Accepted Answer

Slope = ($36,000 - $14,000) / (900 - 100) = $27.50
Constant (using highest observation): $36,000 - ($27.50 x 900) hours = $11,250
Constant (using lowest observation): $14,000- ($27.50 x 100) hours = $11,250
The total cost, y = $11,250 + ($27.50 × 450) = $23,625

Quantum Company Uses the High-Low Method to Estimate the Cost