Hardigree Insurance has collected the following information over the last six months. $$\begin{array} { c c c }
\text { Month } & \text { Units produced } & \text { Total costs } \
\text { March } & 2,000 & \$ 6,700 \
\text { April } & 3,200 & 9,400 \
\text { May } & 2,200 & 7,100 \
\text { June } & 3,000 & 9,500 \
\text { July } & 2,800 & 8,000 \
\text { August } & 2,100 & 6,600
\end{array}$$ Using the high-low method, what is the estimated total cost in a month when 3,100 units are produced?

Question

Hardigree Insurance has collected the following information over the last six months. $$\begin{array} { c c c } 
\text { Month } & \text { Units produced } & \text { Total costs } \
\text { March } & 2,000 & \$ 6,700 \
\text { April } & 3,200 & 9,400 \
\text { May } & 2,200 & 7,100 \
\text { June } & 3,000 & 9,500 \
\text { July } & 2,800 & 8,000 \
\text { August } & 2,100 & 6,600
\end{array}$$ Using the high-low method, what is the estimated total cost in a month when 3,100 units are produced?

Quizplus · Accepted Answer

The high-low method is used to estimate the fixed and variable costs of a company. The fixed costs are the costs that do not change with the level of production, while the variable costs are the costs that do change with the level of production.To use the high-low method, we first need to find the highest and lowest levels of production and their corresponding total costs. In this case, the highest level of production is 3,200 units in April, and the lowest level of production is 2,000 units in March. The corresponding total costs are $9,400 and $6,700, respectively.Next, we need to calculate the variable cost per unit. This is done by dividing the difference in total costs by the difference in production levels. In this case, the variable cost per unit is ($9,400 - $6,700) / (3,200 - 2,000) = $0.875.Finally, we can use the variable cost per unit to estimate the total cost for any given level of production. In this case, we want to estimate the total cost for a month when 3,100 units are produced. To do this, we simply multiply the variable cost per unit by the number of units produced. In this case, the estimated total cost is $0.875 * 3,100 = $2,712.50.Therefore, the estimated total cost in a month when 3,100 units are produced is $2,712.50.

Hardigree Insurance Has Collected the Following Information Over the Last