Exhibit 5-1
Presented below are the production data for the mixed costs incurred by Clarion Company.
$$\begin{array} { l r r }
\text { Muoth } & \text { Cast } & \text { Units } \
\text { March } & \$ 4,700 & 3,700 \
\text { April } & 7,200 & 5,050 \
\text { May } & 5,565 & 4,725 \
\text { June } & 9,500 & 8,500 \
\text { July } & 7,915 & 6,745 \
\text { August } & 8,300 & 7,500
\end{array}$$ Clarion Company uses the high-low method to estimate mixed costs.
-Refer to Exhibit 5-1.How would the cost function be stated using the high-low method?
A)Y = $3,700 + $1.00X
B)Y = $9,500 + $1.00X
C)Y = $1,000 + $1.00X
D)Y = $3,700 + $1.10X
E)None of the answer choices is correct.

Question

Exhibit 5-1
Presented below are the production data for the mixed costs incurred by Clarion Company.
 $$\begin{array} { l r r } 
\text { Muoth } & \text { Cast } & \text { Units } \
\text { March } & \$ 4,700 & 3,700 \
\text { April } & 7,200 & 5,050 \
\text { May } & 5,565 & 4,725 \
\text { June } & 9,500 & 8,500 \
\text { July } & 7,915 & 6,745 \
\text { August } & 8,300 & 7,500
\end{array}$$ Clarion Company uses the high-low method to estimate mixed costs.
-Refer to Exhibit 5-1.How would the cost function be stated using the high-low method?
A)Y = $3,700 + $1.00X
B)Y = $9,500 + $1.00X
C)Y = $1,000 + $1.00X
D)Y = $3,700 + $1.10X
E)None of the answer choices is correct.

Quizplus · Accepted Answer

The high-low method calculates the variable cost per unit as the change in cost divided by the change in units between the highest and lowest activity levels. Here, the variable cost per unit is ($9,500 - $4,700) / (8,500 - 3,700) = $1.00. The fixed cost is then calculated using either the high or low point: $9,500 - ($1.00 * 8,500) = $1,000. Thus, the cost function is Y = $1,000 + $1.00X.

Exhibit 5-1 Presented Below Are the Production Data for the Mixed

Exhibit 5-1
Presented Below Are the Production Data for the Mixed