Answer the following questions using the information below:
The Gangwere Company has assembled the following data pertaining to certain costs that cannot be easily identified as either fixed or variable. Gangwere 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 = $26,672 + $1.84X
B)y = $21,360 + $10.40
C)y = $10,112 + $8.64X
D)y = $3,600 + $10.40X

Question

Answer the following questions using the information below:
The Gangwere Company has assembled the following data pertaining to certain costs that cannot be easily identified as either fixed or variable. Gangwere 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 = $26,672 + $1.84X 
B)y = $21,360 + $10.40 
C)y = $10,112 + $8.64X 
D)y = $3,600 + $10.40X

Quizplus · Accepted Answer

According to the information given, the Gangwere Company has used the high-low method to measure the cost function. Therefore, the cost function can be stated as y = $3,600 + $10.40X, where y represents the total cost and X represents the level of activity. This is because the high-low method uses the highest and lowest levels of activity to determine the variable cost per unit and the total fixed cost.

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