Fromme's Frocks has the following machine hours and production costs for the last six months of last year:
$\begin{array}{lrr}
&\text { Machine }\
\text {Month}&\text {Hours}&\text {Production Coption}\
\text { July } & 15,000 & \$ 12,075 \
\text { August } & 13,500 & 10,800\
\text { September } & 11,500& 9,580\
\text { October } & 15,500 & 12,080\
\text { November } & 14,800& 11,692 \
\text { December } & 12,100 & 9,922
\end{array}$

If Fromme expects to incur 14,000 machine hours in January, what will be the estimated total production cost using the high-low method?
A) $8,750.00.
B) $11,142.50.
C) $22,400.00.
D) $10,889.10.

Question

Fromme's Frocks has the following machine hours and production costs for the last six months of last year:
$\begin{array}{lrr}
&\text { Machine }\
\text {Month}&\text {Hours}&\text {Production Coption}\
\text { July } & 15,000 & \$ 12,075 \
\text { August } & 13,500 &  10,800\
\text { September } & 11,500& 9,580\
\text { October } & 15,500 & 12,080\
\text { November } & 14,800& 11,692 \
\text { December } & 12,100 & 9,922
\end{array}$

If Fromme expects to incur 14,000 machine hours in January, what will be the estimated total production cost using the high-low method?
A) $8,750.00.
B) $11,142.50.
C) $22,400.00.
D) $10,889.10.

Quizplus · Accepted Answer

The high-low method involves taking the highest and lowest machine hours and their corresponding costs to determine the variable cost per machine hour and fixed costs. The variable cost per hour is calculated as (12,080 - 9,580) / (15,500 - 11,500) = $0.625. The fixed cost is then calculated using one of the points, for example, September: 9,580 - (11,500 * 0.625) = $2,362.50. The estimated cost for 14,000 hours is 14,000 * 0.625 + 2,362.50 = $11,142.50.

Fromme's Frocks Has the Following Machine Hours and Production Costs