Shipping expense is $9,000 for 8,000 pounds shipped and $11,250 for 11,000 pounds shipped. Assuming that this activity is within the relevant range, if the company ships 9,000 pounds, its expected shipping expense is closest to:
A) $10,125
B) $8,583
C) $9,972
D) $9,750

Question

Quizplus · Accepted Answer

The shipping expense can be calculated using the high-low method to determine the variable cost per pound and fixed cost. The variable cost per pound is ($11,250 - $9,000) / (11,000 - 8,000) = $0.75. The fixed cost is $9,000 - (8,000 * $0.75) = $3,000. For 9,000 pounds, the expense is (9,000 * $0.75) + $3,000 = $9,750.

Shipping Expense Is $9,000 for 8,000 Pounds Shipped and $11,250