Answer the following questions using the information below:
The Yeppoon Company uses the high-low method to estimate its cost function.The information for 2018 is provided below:
$$\begin{array} { l c c }
& \text { Machine-hours } & \text { Costs } \
\text { Highest observation of cost driver } & 2000 & \$ 225000 \
\text { Lowest observation of cost driver } & 1000 & \$ 125000
\end{array}$$
-What is the estimate of the total cost when 1100 machine-hours are used?
A)$150 000
B)$135 000
C)$200 000
D)$125 000

Question

Answer the following questions using the information below:
The Yeppoon Company uses the high-low method to estimate its cost function.The information for 2018 is provided below:
 $$\begin{array} { l c c } 
& \text { Machine-hours } & \text { Costs } \
\text { Highest observation of cost driver } & 2000 & \$ 225000 \
\text { Lowest observation of cost driver } & 1000 & \$ 125000
\end{array}$$
-What is the estimate of the total cost when 1100 machine-hours are used?
A)$150 000
B)$135 000
C)$200 000
D)$125 000

Quizplus · Accepted Answer

First, calculate the variable cost per machine-hour using the high-low method: $$ \frac{\$225,000 - \$125,000}{2000 - 1000} = \$100 $$ per machine-hour. The fixed cost can be calculated by subtracting the total variable cost at either level from the total cost at that level. Using the lowest level of activity: $$ \$125,000 - (1000 \times \$100) = \$25,000 $$ in fixed costs. Therefore, the total cost at 1100 machine-hours is: $$ \$25,000 + (1100 \times \$100) = \$135,000. $$

Answer the Following Questions Using the Information Below: the Yeppoon

Answer the Following Questions Using the Information Below:
the Yeppoon