Cosby Company is attempting to develop the cost function for repair costs. The following past data are available: Machine Hours Repair Costs
4,800 $6,385
3,400 4,585
4,000 5,285
5,900 7,085
Using the high-low method, what is the estimated repair cost for 4,500 machine hours?
A)$5,785
B)$5,585
C)$5,685
D)$5,985

Question

Quizplus · Accepted Answer

Using the high-low method:
Highest hours: 5,900
Lowest hours: 3,400

Highest cost: $7,085
Lowest cost: $4,585

The change in cost is $7,085 - $4,585 = $2,500
The change in machine hours is 5,900 - 3,400 = 2,500

The variable cost per machine hour is $2,500/2,500 = $1

So, the estimated repair cost for 4,500 machine hours is:
$5,285 + ($1 x 1,100) = $5,685

Therefore, the best choice is C, $5,685.

Cosby Company Is Attempting to Develop the Cost Function for Repair