The managers of the production department have decided to use the production levels of 2009 and 2012 as examples of the highest and lowest years of operating levels. During 2009 the department used 280,000 litres of chemicals and during 2012 it used 240,000 litres. The department's costs for 2009 were $460,000, but only $400,000 in 2012.
Required:
Using the high-low method determine the cost estimating equation for the department if litres of direct material are used as the cost driver?

Question

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The Answer of The managers of the production department have decided to use the production levels of 2009 and 2012 as examples of the highest and lowest years of operating levels. During 2009 the department used 280,000 litres of chemicals and during 2012 it used 240,000 litres. The department's costs for 2009 were $460,000, but only $400,000 in 2012.
Required:
Using the high-low method determine the cost estimating equation for the department if litres of direct material are used as the cost driver?

The Managers of the Production Department Have Decided to Use