Answer the following questions using the information below:
Presented below are the production data for the first six months of the year for the mixed costs incurred by Benalla Company.
$$\begin{array} { l r r }
\text { Month } & \text { Cost } & \text { Units } \
\text { January } & \$ 4890 & 4100 \
\text { February } & 4024 & 3200 \
\text { March } & 6480 & 5300 \
\text { April } & 8840 & 7500 \
\text { May } & 5800 & 4800 \
\text { June } & 7336 & 6600
\end{array}$$ Benalla Company uses the 'high-low method' to analyse mixed costs.
-How would the cost function be stated?
A)y = $440 + $1.12X
B)y = $7850 + $0.132X
C)y = $3 562.30 + $0.144X
D)y = $107.20 + $1.224X

Question

Answer the following questions using the information below:
Presented below are the production data for the first six months of the year for the mixed costs incurred by Benalla Company.
 $$\begin{array} { l r r } 
\text { Month } & \text { Cost } & \text { Units } \
\text { January } & \$ 4890 & 4100 \
\text { February } & 4024 & 3200 \
\text { March } & 6480 & 5300 \
\text { April } & 8840 & 7500 \
\text { May } & 5800 & 4800 \
\text { June } & 7336 & 6600
\end{array}$$ Benalla Company uses the 'high-low method' to analyse mixed costs.
-How would the cost function be stated?
A)y = $440 + $1.12X
B)y = $7850 + $0.132X
C)y = $3 562.30 + $0.144X
D)y = $107.20 + $1.224X

Quizplus · Accepted Answer

The high-low method involves taking the highest and lowest activity levels and their associated costs to determine the variable cost per unit and the fixed cost. Here, the highest activity level is in April (7500 units, $8840 cost) and the lowest is in February (3200 units, $4024 cost). The variable cost per unit is calculated as: $$ \frac{\$8840 - \$4024}{7500 - 3200} = \frac{\$4816}{4300} = \$1.12 $$ per unit. To find the fixed cost, we substitute the variable cost and either the high or low activity level into the total cost equation: $$ \$4024 = Fixed Cost + (\$1.12 \times 3200) $$ Solving for Fixed Cost gives: $$ Fixed Cost = \$4024 - \$3584 = \$440 $$ Therefore, the cost function is stated as $y = \$440 + \$1.12X$.

Answer the Following Questions Using the Information Below: Presented Below

Answer the Following Questions Using the Information Below:
Presented Below