The following data has been assembled for Cub Company.Use the high-low method. The expected total cost at an operating level of 2,850 hours is ________.
A)$25,692
B)$32,016
C)$33,240
D)$34,736

Question

The following data has been assembled for Cub Company.Use the high-low method.  The expected total cost at an operating level of 2,850 hours is ________.
A)$25,692 
B)$32,016 
C)$33,240 
D)$34,736

Quizplus · Accepted Answer

Using the high-low method:
Variable cost per hour = (cost at high level - cost at low level) / (high level hours - low level hours)
= ($191,960 - $165,240) / (3,000 - 2,500) = $53.52/hour

Fixed cost = Total cost at high level - (variable cost per hour x high level hours)
= $191,960 - ($53.52 x 3,000) = $35,864

Total cost at 2,850 hours = ($53.52 x 2,850) + $35,864 = $33,240

Therefore, the best choice is C.

The Following Data Has Been Assembled for Cub Company