Sterling Glass Company uses the high-low method to analyze mixed costs.The following information relates to the production data for the first six months of the year.
How should the cost function be properly stated?
A)Y = $2,025 + $2.50H.
B)Y = $3,890 + $2.00H.
C)Y = $4,085 + $2.00H.
D)Y = $5,260 + $2.50H. Unit variable cost = ($5,685 - $4,485)/(800 - 200)= $2.00.Fixed cost = $5,685 - (800 x $2.00)= $4,085 or $4,485 - (200 x $2.00)= $4,085

Question

Sterling Glass Company uses the high-low method to analyze mixed costs.The following information relates to the production data for the first six months of the year. 
How should the cost function be properly stated?
A)Y = $2,025 + $2.50H. 
B)Y = $3,890 + $2.00H. 
C)Y = $4,085 + $2.00H. 
D)Y = $5,260 + $2.50H. Unit variable cost = ($5,685 - $4,485)/(800 - 200)= $2.00.Fixed cost = $5,685 - (800 x $2.00)= $4,085 or $4,485 - (200 x $2.00)= $4,085

Quizplus · Accepted Answer

Using the high-low method, the unit variable cost can be calculated as ($5,685 - $4,485)/(800 - 200) = $2.00. The fixed cost can be calculated as $5,685 - (800 x $2.00) = $4,085 or $4,485 - (200 x $2.00) = $4,085. Therefore, the cost function can be stated as Y = $4,085 + $2.00H, which is option C.

Sterling Glass Company Uses the High-Low Method to Analyze Mixed