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

What is the estimated total cost when 1,900 machine-hours are used?
A) $509,600
B) $290,000
C) $489,700
D) $157,700

Question

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

What is the estimated total cost when 1,900 machine-hours are used?
A) $509,600 
B) $290,000 
C) $489,700 
D) $157,700

Quizplus · Accepted Answer

Slope = ($332,000 - $312,000) / (4,000 - 3,000) = $20.00
Constant (using highest observation): $332,000 - ($20.00 x 4,000) hours = $252,000
Constant (using lowest observation): $312,000 - ($20.00 x 3,000) hours = $252,000
The total cost, y = $252,000 + ($20.00 × 1,900) = $290,000

Taunton Company Uses the High-Low Method to Estimate Its Cost