The following data has been assembled for Robert Company.Use the high-low method.
$\begin{array}{lll}
\text { Month }&\text { Cost }&\text { Hours: }\
\text { January } & \$ 24,400 & 2,000 \
\text { February } & \$ 39,000 & 2,200 \
\text { March } & \$ 35,280 & 2,750 \
\text { April } & \$ 36,400 & 3,500 \
\text { May } & \$ 40,000 & 4,000
\end{array}$
The cost function is ________ where Y = Total cost and X = Number of hours.
A) Y = $3,600 + $10.40X
B) Y = $8,800 + $7.80X
C) Y = $21,360 + $1.52X
D) Y = $26,672 + $1.84X

Question

Quizplus · Accepted Answer

The high-low method uses the highest and lowest activity levels to estimate the variable cost per unit and fixed costs. The highest activity is May (4,000 hours, $40,000) and the lowest is January (2,000 hours, $24,400). The variable cost per hour is ($40,000 - $24,400) / (4,000 - 2,000) = $7.80. The fixed cost is calculated by substituting back into the cost equation: $40,000 = Fixed Cost + $7.80 * 4,000, giving a fixed cost of $8,800. Thus, the cost function is Y = $8,800 + $7.80X.

The Following Data Has Been Assembled for Robert Company The Cost Function Is ________ Where Y = Total Cost