Quantum Company uses the high-low method to estimate the cost function. The information for 2017 is provided below:

What is the constant for the estimated cost equation?
A) $12,000
B) $16,000
C) $20,000
D) $32,000

Question

Quantum Company uses the high-low method to estimate the cost function. The information for 2017 is provided below:

What is the constant for the estimated cost equation?
A) $12,000 
B) $16,000 
C) $20,000 
D) $32,000

Quizplus · Accepted Answer

Slope ($32,000 - $16,000) / ($1,000 - 200) = $20.00
Using highest observation: Constant = $32,000 - ($20.00 × 1,000 hours) = $12,000
OR: Using lowest observation: Constant = $16,000 - ($20.00 × 200 hours) = $12,000

Quantum Company Uses the High-Low Method to Estimate the Cost