Answer the following questions using the information below:
Syosis Company uses the high-low method to estimate its cost function. The information for 2015 is provided below:
$\begin{array}{lll}&\text { Machine-hours }& \text { Costs }\
\text { Highest observation of cost driver } & 2,500 & \$ 300,000 \
\text { Lowest observation of cost driver } & 1,500 & \$ 220,000
\end{array}$
-What is the constant for the estimated cost equation?
A) $220,000
B) $300,000
C) $100,000
D) $0

Question

Answer the following questions using the information below:
Syosis Company uses the high-low method to estimate its cost function. The information for 2015 is provided below:
 $\begin{array}{lll}&\text { Machine-hours }& \text { Costs }\
\text { Highest observation of cost driver } & 2,500 & \$ 300,000 \
\text { Lowest observation of cost driver } & 1,500 & \$ 220,000
\end{array}$
-What is the constant for the estimated cost equation?
A) $220,000
B) $300,000
C) $100,000
D) $0

Quizplus · Accepted Answer

The constant (fixed cost) is calculated by first determining the variable cost per machine-hour, which is ($300,000 - $220,000) / (2,500 - 1,500) = $80 per machine-hour. Then, using the high or low point, the fixed cost is calculated as $300,000 - ($80 * 2,500) = $100,000.

Answer the Following Questions Using the Information Below: Syosis Company

Answer the Following Questions Using the Information Below:
Syosis Company