To follow is information about the units produced and total manufacturing costs for Pine Enterprises for the past six months.

Using the high-low method,what will the total monthly manufacturing costs be if the company produces 9,000 units?
A)$8,750
B)$4,500
C)$8,400
D)$4,250

Question

To follow is information about the units produced and total manufacturing costs for Pine Enterprises for the past six months.

Using the high-low method,what will the total monthly manufacturing costs be if the company produces 9,000 units?
A)$8,750 
B)$4,500 
C)$8,400 
D)$4,250

Quizplus · Accepted Answer

A)
Highest cost $8,150 Highest activity 7,800
Lowest cost $6,500 Lowest activity 4,500
Difference $1,650 3,300
NOW divide the difference in the cost by the difference in the activity equals Variable cost per unit.$1,650/3,300 = $ .50
Put the numbers into the Cost Equation: $8,150 = $.50 (7,800)+ f
$4,250 = f
Finally y = $ .50 (9,000)+ $4,250
y = $8,750

To Follow Is Information About the Units Produced and Total