Question 1

Quantum Company uses the high-low method to estimate the cost function. The information for 2017 is provided below:

What is the constant for the estimated cost equation?
A) $12,000
B) $16,000
C) $20,000
D) $32,000

Accepted Answer

Slope ($32,000 - $16,000) / ($1,000 - 200) = $20.00
Using highest observation: Constant = $32,000 - ($20.00 × 1,000 hours) = $12,000
OR: Using lowest observation: Constant = $16,000 - ($20.00 × 200 hours) = $12,000

Question 2

Quantum Company uses the high-low method to estimate the cost function. The information for 2017 is provided below:

What is the estimated total cost when 450 machine-hours are used?
A) $63,000
B) $32,000
C) $18,000
D) $23,625

Accepted Answer

Slope = ($36,000 - $14,000) / (900 - 100) = $27.50
Constant (using highest observation): $36,000 - ($27.50 x 900) hours = $11,250
Constant (using lowest observation): $14,000- ($27.50 x 100) hours = $11,250
The total cost, y = $11,250 + ($27.50 × 450) = $23,625

Question 3

Quantum Company uses the high-low method to estimate the cost function. The information for 2017 is provided below:

What is the slope coefficient?
A) $80.00
B) $56.00
C) $40.00
D) $50.00

Accepted Answer

Slope = ($20,000 - $8,000) / (400 - 100) = $40.00

Question 4

Presented below are the production data for the first six months of the year for the mixed costs incurred by Venus Company.

Venus Company uses the high-low method to analyze mixed costs.
What is the estimated total cost at an operating level of 6,300 units?
A) $9,450
B) $8,179
C) $6,867
D) $7,875

Accepted Answer

b = ($10,250 - $4,800) / (8,200 - 3,200) = $1.09
$10,250 = a + $1.09 × 8,200
a = $1,312
Cost function is: Y = $1,312 + $1.09X
Y = $1,312 + $1.09 × 6,300 = $8,179

Question 5

The White Company has assembled the following data pertaining to certain costs that cannot be easily identified as either fixed or variable. White Company has heard about a method of measuring cost functions called the high-low method and has decided to use it in this situation.

What is the estimated total cost at an operating level of 3,400 hours?
A) $70,750
B) $39,800
C) $37,400
D) $37,725

Accepted Answer

b = ($68,400 - $37,600) / (6,000 - 3,200) = $11.00
$68,400 = a + ($11.00 × $6,000)
a = $2,400
y = $2,400 + ($11.00 × 3,400) = $39,800

Question 6

The first step in estimating a cost function using quantitative analysis is to plot the data.

Accepted Answer

The first step in estimating a cost function using quantitative analysis is to choose the dependent variable.

Question 7

In estimating a cost function using quantitative analysis, the dependent variable is the factor used to predict the independent variable.

Accepted Answer

In estimating a cost function using quantitative analysis, the independent variable is the factor used to predict the dependent variable.

Question 8

For Heavy Manufacturing Company, labor-hours are 40,000 and wages $144,000 at the high point of the relevant range, and labor-hours are 24,000 and wages $96,000 at the low point of the relevant range.
What is the slope coefficient?
A) $3.75
B) $3.00
C) $3.60
D) $4.00

Accepted Answer

Slope = ($144,000 - $96,000) / (40,000 - 24,000) = $3.00 per labor-hour

Question 9

The Connors Company has assembled the following data pertaining to certain costs that cannot be easily identified as either fixed or variable. Connors Company has heard about a method of measuring cost functions called the high-low method and has decided to use it in this situation.

What is the estimated total cost at an operating level of 9,000 hours?
A) $34,200
B) $38,200
C) $41,400
D) $37,800

Accepted Answer

b = ($42,000 - $23,000) / (10,000 - 5,000) = $3.80 for the highest and lowest values of the cost driver
$42,000 = a + ($3.80 × 10,000)
a = $4,000
Cost function is Y = $4,000 + $3.80X
Y = $4,000 + ($3.80 × 9,000)
Y = $38,200

Question 10

For Heavy Manufacturing Company, labor-hours are 48,000 and wages $156,000 at the high point of the relevant range, and labor-hours are 32,000 and wages $112,000 at the low point of the relevant range.
What is the estimated total labor costs at Heavy Manufacturing Company when 11,400 labor-hours are used?
A) $38,190
B) $55,350
C) $39,900
D) $37,050

Accepted Answer

Slope = ($156,000 - $112,000) / (48,000 - 32,000) = $2.75
Constant (using highest observation): $156,000 - ($2.75 × 48,000) = $24,000
Constant (using lowest observation): $112,000 - ($2.75 × 32,000) = $24,000
Total labor costs, y = $24,000 + ($2.75 × 11,400) = $55,350

Question 11

Quantum Company uses the high-low method to estimate the cost function. The information for 2017 is provided below:

What is the estimated cost function for the above data?
A) y = 26,000 + 62.00X
B) y = 6,000 + 50.00X
C) y = 36,000 + 60.00X
D) y = 30,000 + 65.00X

Accepted Answer

Slope = ($36,000 - $26,000) / (600 - 400) = $50.00
Constant (using highest observation): $36,000 - ($50.00 x 600) hours = $6,000
Constant (using lowest observation): $26,000 - ($50.00 x 400) hours = $6,000

Question 12

Taunton Company uses the high-low method to estimate its cost function. The information for 2017 is provided below:

What is the estimated cost function for the above data?
A) y = 332,000 + 83X
B) y = 312,000 + 104X
C) y = 252,000 + 20.00X
D) y = 92.00X

Accepted Answer

Slope = ($332,000 - $312,000) / (4,000 - 3,000) = $20.00
Constant (using highest observation): $332,000 - ($20.00 x 4,000) hours = $252,000
Constant (using lowest observation): $312,000 - ($20.00 x 3,000) hours = $252,000

Question 13

For Heavy Manufacturing Company, labor-hours are 40,000 and wages $184,000 at the high point of the relevant range, and labor-hours are 24,000 and wages $120,000 at the low point of the relevant range.
What is the constant?
A) $24,000
B) $64,000
C) $120,000
D) $184,000

Accepted Answer

Slope = ($184,000 - $120,000) / (40,000 - 24,000) = $4.00
Constant (using highest observation): $184,000 - ($4.00 × 40,000) = $24,000
Constant (using lowest observation): $120,000 - ($4.00 × 24,000) = $24,000

Question 14

The White Company has assembled the following data pertaining to certain costs that cannot be easily identified as either fixed or variable. White Company has heard about a method of measuring cost functions called the high-low method and has decided to use it in this situation.

How is the cost function stated?
A) y = $34,500 + $9.90X
B) y = $69,300 + $8.70X
C) y = $34,800 + $11.50X
D) y = $8,400 + $8.70X

Accepted Answer

b = ($69,300 - $34,500) / (7,000 - 3,000) = $8.70
$69,300 = a + ($8.70 × 7,000)
a = $8,400

Question 15

Taunton Company uses the high-low method to estimate its cost function. The information for 2017 is provided below:

What is the slope coefficient?
A) $115.00
B) $126.00
C) $60.00
D) $120.00

Accepted Answer

Slope = ($345,000 - $315,000) / (3,000 - 2,500) = $60.00

Question 16

Presented below are the production data for the first six months of the year for the mixed costs incurred by Venus Company.

Venus Company uses the high-low method to analyze mixed costs.
How would the cost function be stated?
A) y = $1,080 + $0.98X
B) y = $4,900 + $1.25X
C) y = $2,510 + $0.98X
D) y = $9,900 + $1.10X

Accepted Answer

b = ($9,900 - $5,000) / (9,000 - 4,000) = $0.98
$9,900 = a + $0.98 × 9,000
a = $1,080
Cost function is Y = $1,080 + $0.98X

Question 17

Taunton Company uses the high-low method to estimate its cost function. The information for 2017 is provided below:

What is the constant for the estimated cost equation?
A) $277,500
B) $300,000
C) $165,000
D) $135,000

Accepted Answer

Slope = ($300,000 - $277,500) / (3,000 - 2,500) = $45.00
Constant (using highest observation) = $300,000 - ($45.00 × 3,000 hours) = $165,000
Constant (using lowest observation) = $277,500 - ($45.00 × 2,500 hours) = $165,000

Question 18

The Connors Company has assembled the following data pertaining to certain costs that cannot be easily identified as either fixed or variable. Connors Company has heard about a method of measuring cost functions called the high-low method and has decided to use it in this situation.

What is the cost function?
A) y = $48,000 + $4.80X
B) y = $24,000 + $4.36X
C) y = $34,700 + $4.80X
D) y = $4,000 + $4.00X

Accepted Answer

b = ($48,000 - $24,000) / (11,000 - 5,000) = $4.00 for the highest and lowest values of the cost driver
Using highest observation: $48,000 = a + ($4.00 × 11,000)
a = $4,000
Cost function is Y = $4,000 + $4.00X

Question 19

Taunton Company uses the high-low method to estimate its cost function. The information for 2017 is provided below:

What is the estimated total cost when 1,900 machine-hours are used?
A) $509,600
B) $290,000
C) $489,700
D) $157,700

Accepted Answer

Slope = ($332,000 - $312,000) / (4,000 - 3,000) = $20.00
Constant (using highest observation): $332,000 - ($20.00 x 4,000) hours = $252,000
Constant (using lowest observation): $312,000 - ($20.00 x 3,000) hours = $252,000
The total cost, y = $252,000 + ($20.00 × 1,900) = $290,000

Question 20

Because the cost driver is the same for the fringe benefits of life insurance and pension benefits cost is the same, those costs can be aggregated into one homogeneous cost pool.

Accepted Answer

Since the cost driver is the same for both fringe benefits of life insurance and pension benefits, the cost can be aggregated into one homogeneous cost pool. Therefore, the statement is true.

Quiz 10: Determining How Costs Behave

Quantum Company uses the high-low method to estimate the cost function. The information for 2017 is provided below: What is the constant for the estimated cost equation?

Quantum Company uses the high-low method to estimate the cost function. The information for 2017 is provided below: What is the estimated total cost when 450 machine-hours are used?

Quantum Company uses the high-low method to estimate the cost function. The information for 2017 is provided below: What is the slope coefficient?

Presented below are the production data for the first six months of the year for the mixed costs incurred by Venus Company. Venus Company uses the high-low method to analyze mixed costs. What is the estimated total cost at an operating level of 6,300 units?

The first step in estimating a cost function using quantitative analysis is to plot the data.

In estimating a cost function using quantitative analysis, the dependent variable is the factor used to predict the independent variable.

For Heavy Manufacturing Company, labor-hours are 40,000 and wages $144,000 at the high point of the relevant range, and labor-hours are 24,000 and wages $96,000 at the low point of the relevant range. What is the slope coefficient?

Quantum Company uses the high-low method to estimate the cost function. The information for 2017 is provided below: What is the estimated cost function for the above data?

Taunton Company uses the high-low method to estimate its cost function. The information for 2017 is provided below: What is the estimated cost function for the above data?

For Heavy Manufacturing Company, labor-hours are 40,000 and wages $184,000 at the high point of the relevant range, and labor-hours are 24,000 and wages $120,000 at the low point of the relevant range. What is the constant?

Taunton Company uses the high-low method to estimate its cost function. The information for 2017 is provided below: What is the slope coefficient?

Presented below are the production data for the first six months of the year for the mixed costs incurred by Venus Company. Venus Company uses the high-low method to analyze mixed costs. How would the cost function be stated?

Taunton Company uses the high-low method to estimate its cost function. The information for 2017 is provided below: What is the constant for the estimated cost equation?

Taunton Company uses the high-low method to estimate its cost function. The information for 2017 is provided below: What is the estimated total cost when 1,900 machine-hours are used?

Because the cost driver is the same for the fringe benefits of life insurance and pension benefits cost is the same, those costs can be aggregated into one homogeneous cost pool.