Answer the following questions using the information below:
Uninder Company uses the high-low method to estimate the cost function. The information for 2015 is provided below:
$\begin{array}{lll}&\text { Machine-hours } & \text { Labor Costs }\
\text { Highest observation of cost driver } & 550 & \$ 22,000 \
\text { Lowest observation of cost driver } & 250 & \$ 13,000
\end{array}$
-What is the constant for the estimated cost equation?
A) $5,500
B) $13,000
C) $16,500
D) $22,000

Question

Answer the following questions using the information below:
Uninder Company uses the high-low method to estimate the cost function. The information for 2015 is provided below:
 $\begin{array}{lll}&\text { Machine-hours } & \text { Labor Costs }\
\text { Highest observation of cost driver } & 550 & \$ 22,000 \
\text { Lowest observation of cost driver } & 250 & \$ 13,000
\end{array}$
-What is the constant for the estimated cost equation?
A) $5,500
B) $13,000
C) $16,500
D) $22,000

Quizplus · Accepted Answer

The constant (fixed cost) is calculated by first finding the variable cost per machine-hour: ($22,000 - $13,000) / (550 - 250) = $30 per machine-hour. Then, using the highest observation: $22,000 - ($30 * 550) = $5,500.

Answer the Following Questions Using the Information Below: Uninder Company

Answer the Following Questions Using the Information Below:
Uninder Company