The Missou Manufacturing Company recorded overhead costs of $14,182 at an activity level of 4,200 machine hours and $8,748 at 2,300 machine hours. What is the total estimated cost for 2,600 machine hours using the high-low method to estimate the cost equation?

Question

Quizplus · Accepted Answer

The variable cost per machine hour is calculated using the high-low method: ($14,182 - $8,748) / (4,200 - 2,300) = $5.50 per machine hour. The fixed cost is then calculated using one of the points: $8,748 - ($5.50 * 2,300) = $6,463. The total estimated cost for 2,600 machine hours is $6,463 + ($5.50 * 2,600) = $9,606.

The Missou Manufacturing Company Recorded Overhead Costs of $14,182 at an Activity