The managers of the production department have decided to use the production levels of 2013 and 2016 as examples of the highest and lowest years of operating levels. During 2013 the department used 280,000 litres of chemicals and during 2016 it used 240,000 litres. The department's costs for 2013 were $460,000, but only $400,000 in 2016.
Required:
Using the high-low method determine the cost estimating equation for the department if litres of direct material are used as the cost driver?

Question

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The Answer of The managers of the production department have decided to use the production levels of 2013 and 2016 as examples of the highest and lowest years of operating levels. During 2013 the department used 280,000 litres of chemicals and during 2016 it used 240,000 litres. The department's costs for 2013 were $460,000, but only $400,000 in 2016.
Required:
Using the high-low method determine the cost estimating equation for the department if litres of direct material are used as the cost driver?

The Managers of the Production Department Have Decided to Use