The following information was available about supplies cost for the first three months of the year: $$\begin{array} { l c c }
\text { Month } & \text { Production Volume } & \text { Supplies Cost } \
\text { January } & 4,800 & £ 21,700 \
\text { February } & 5,000 & 20,900 \
\text { March } & 3,400 & 16,100
\end{array}$$ Using the high-low method, an estimate of supplies cost at 4,500 units of production would be
A)£19,400.
B)£20,500.
C)£19,950.
D)none of the above.

Question

The following information was available about supplies cost for the first three months of the year: $$\begin{array} { l c c } 
\text { Month } & \text { Production Volume } & \text { Supplies Cost } \
\text { January } & 4,800 & £ 21,700 \
\text { February } & 5,000 & 20,900 \
\text { March } & 3,400 & 16,100
\end{array}$$ Using the high-low method, an estimate of supplies cost at 4,500 units of production would be
A)£19,400.
B)£20,500.
C)£19,950.
D)none of the above.

Quizplus · Accepted Answer

The high-low method calculates variable cost per unit as (21,700 - 16,100) / (4,800 - 3,400) = £2.5. Fixed cost is calculated using either high or low point: 21,700 - (4,800 * 2.5) = £9,700. Estimated cost at 4,500 units: (4,500 * 2.5) + 9,700 = £19,400.

The Following Information Was Available About Supplies Cost for the First