Cardinal Cleaners
Cardinal Cleaners documented the gallons of cleaning solvent it used as well as total overhead costs for the past five months as follows:
$$\begin{array} { l c c }
& \text { Number of gallons } & \text { Total overhead costs } \
\hline \text { July } & 160 & \$ 6500 \
\text { August } & 150 & 6100 \
\text { September } & 155 & 6700 \
\text { October } & 175 & 7000 \
\text { November } & 170 & 6800
\end{array}$$
-Using the high/low method,what is equation to predict total overhead costs?

Question

Cardinal Cleaners
Cardinal Cleaners documented the gallons of cleaning solvent it used as well as total overhead costs for the past five months as follows:
$$\begin{array} { l c c } 
& \text { Number of gallons } & \text { Total overhead costs } \
\hline \text { July } & 160 & \$ 6500 \
\text { August } & 150 & 6100 \
\text { September } & 155 & 6700 \
\text { October } & 175 & 7000 \
\text { November } & 170 & 6800
\end{array}$$
-Using the high/low method,what is equation to predict total overhead costs?

Quizplus · Accepted Answer

The high/low method involves identifying the highest and lowest activity levels and their associated costs to determine the variable cost per unit and the fixed cost. Here, the highest activity level is in October (175 gallons, $7000 cost) and the lowest is in August (150 gallons, $6100 cost). The difference in gallons is 25 (175 - 150), and the difference in cost is $900 ($7000 - $6100). The variable cost per unit is $900 / 25 = $36. To find the fixed cost, we use one of the points, say the highest: $7000 = Fixed Cost + ($36 * 175). Solving for Fixed Cost gives $700. Thus, the equation is Y = $700 + $36x.

Cardinal Cleaners Cardinal Cleaners Documented the Gallons of Cleaning Solvent

Cardinal Cleaners
Cardinal Cleaners Documented the Gallons of Cleaning Solvent