The Connors Company has assembled the following data pertaining to certain costs that cannot be easily identified as either fixed or variable. Connors Company has heard about a method of measuring cost functions called the high-low method and has decided to use it in this situation.

What is the cost function?
A) y = $48,000 + $4.80X
B) y = $24,000 + $4.36X
C) y = $34,700 + $4.80X
D) y = $4,000 + $4.00X

Question

The Connors Company has assembled the following data pertaining to certain costs that cannot be easily identified as either fixed or variable. Connors Company has heard about a method of measuring cost functions called the high-low method and has decided to use it in this situation.

What is the cost function?

What is the cost function?
A) y = $48,000 + $4.80X 
B) y = $24,000 + $4.36X 
C) y = $34,700 + $4.80X 
D) y = $4,000 + $4.00X

Quizplus · Accepted Answer

b = ($48,000 - $24,000) / (11,000 - 5,000) = $4.00 for the highest and lowest values of the cost driver
Using highest observation: $48,000 = a + ($4.00 × 11,000)
a = $4,000
Cost function is Y = $4,000 + $4.00X

The Connors Company Has Assembled the Following Data Pertaining to Certain