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

What is the estimated cost function for the above data?
A) y = 26,000 + 62.00X
B) y = 6,000 + 50.00X
C) y = 36,000 + 60.00X
D) y = 30,000 + 65.00X

Question

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

What is the estimated cost function for the above data?
A) y = 26,000 + 62.00X 
B) y = 6,000 + 50.00X 
C) y = 36,000 + 60.00X 
D) y = 30,000 + 65.00X

Quizplus · Accepted Answer

Slope = ($36,000 - $26,000) / (600 - 400) = $50.00
Constant (using highest observation): $36,000 - ($50.00 x 600) hours = $6,000
Constant (using lowest observation): $26,000 - ($50.00 x 400) hours = $6,000

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