Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 26

Sanders Bears produces stuffed animals. Sanders is in the process of implementing a cost forecasting system using the high-low method. The variable cost per animal is $2 and the high and low costs used were $80,000 for 120,000 animals and $40,000 for 100,000 animals. What is the value of the fixed cost for the cost estimating equation?

Step 1 of 2

High-low cost estimation:

The high-low method of cost estimation is used to estimate the total costs at a given sales level. The cost function under high-low method is.