Answer the following questions using the information below:
The Frontive Company has assembled the following data pertaining to certain costs that cannot be easily identified as either fixed or variable. Frontive Company has heard about a method of measuring cost functions called the high-low method and has decided to use it in this situation.
$\begin{array}{rr}\text { Cost}&\text { Hours }\
\$ 24,700 & 5,000 \
26,000 & 5,500 \
34,000 & 7,500 \
45,370 & 10,300 \
38,000 & 9,500
\end{array}$
-What is the cost function?
A) y = $45,370 + $4.19X
B) y = $24,700 + $4.40X
C) y = $34,000 + $4.94X
D) y = $5,200 + $3.90X

Question

Answer the following questions using the information below:
The Frontive Company has assembled the following data pertaining to certain costs that cannot be easily identified as either fixed or variable. Frontive Company has heard about a method of measuring cost functions called the high-low method and has decided to use it in this situation.
 $\begin{array}{rr}\text { Cost}&\text {  Hours }\
\$ 24,700 & 5,000 \
26,000 & 5,500 \
34,000 & 7,500 \
45,370 & 10,300 \
38,000 & 9,500
\end{array}$
-What is the cost function?
A) y = $45,370 + $4.19X
B) y = $24,700 + $4.40X
C) y = $34,000 + $4.94X
D) y = $5,200 + $3.90X

Quizplus · Accepted Answer

The high-low method uses the highest and lowest activity levels to estimate the variable cost per unit and the fixed cost. The variable cost per hour is calculated as (45,370 - 24,700) / (10,300 - 5,000) = $3.90. The fixed cost is then calculated using either the high or low point: 45,370 - (3.90 * 10,300) = $5,200. Thus, the cost function is y = $5,200 + $3.90X.

Answer the Following Questions Using the Information Below: the Frontive

Answer the Following Questions Using the Information Below:
the Frontive