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 estimated cost function for the above data?
A) y = 13,000 + 43.75X
B) y = 5,500 + 30X
C) y = 22,000 + 40X
D) y = 16,500 + 52X

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 estimated cost function for the above data?
A) y = 13,000 + 43.75X
B) y = 5,500 + 30X
C) y = 22,000 + 40X
D) y = 16,500 + 52X

Quizplus · Accepted Answer

The variable cost per machine-hour is calculated as (22,000 - 13,000) / (550 - 250) = 30. The fixed cost is calculated using the high or low point: 22,000 - (30 * 550) = 5,500. Thus, the cost function is y = 5,500 + 30X.

Answer the Following Questions Using the Information Below: Uninder Company

Answer the Following Questions Using the Information Below:
Uninder Company