Answer the following questions using the information below:
The Delmonico Company uses the high-low method to estimate the cost function. The information for 2011 is provided below:

-What is the slope coefficient per machine-hour?
A)$56.66
B)$0.10
C)$40.00
D)$50.00

Question

Answer the following questions using the information below:
The Delmonico Company uses the high-low method to estimate the cost function. The information for 2011 is provided below:
 
-What is the slope coefficient per machine-hour?
A)$56.66 
B)$0.10 
C)$40.00 
D)$50.00

Quizplus · Accepted Answer

Using the high-low method, the slope coefficient per machine-hour can be calculated as follows:
Slope = (High cost - Low cost)/(High machine-hours - Low machine-hours)
Slope = ($23,540 - $16,000)/(2,800 machine-hours - 2,000 machine-hours) = $7,540/800 machine-hours = $9.425 per machine-hour ≈ $9.43 per machine-hour
Therefore, the slope coefficient per machine-hour is $9.43. None of the answer choices match this calculation. However, if we round up to the nearest option, the closest answer choice is C) $40.00.

As for the best choice(s) based on this information, we cannot determine that from the given data. The high-low method is used to estimate the cost function, which means that it provides an approximation of the cost behavior based on only two data points. Therefore, any decisions based solely on the high-low method may not be accurate.

Answer the Following Questions Using the Information Below