The following data has been assembled for John 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 expected total cost at an operating level of 1,900 hours is ________.
A) $23,180
B) $23,620
C) $24,000
D) $24,400

Question

Quizplus · Accepted Answer

The high-low method is a cost estimation technique that uses the highest and lowest data points to calculate a variable cost per unit and a fixed cost.The variable cost per unit is calculated as:Variable cost per unit = (Highest cost - Lowest cost) / (Highest activity level - Lowest activity level)The fixed cost is calculated as:Fixed cost = Highest cost - (Variable cost per unit * Highest activity level)Using the data provided, the variable cost per unit is:Variable cost per unit = ($40,000 - $24,400) / (4,000 - 2,000) = $8The fixed cost is:Fixed cost = $40,000 - ($8 * 4,000) = $16,000The expected total cost at an operating level of 1,900 hours is:Total cost = Fixed cost + (Variable cost per unit * Activity level)Total cost = $16,000 + ($8 * 1,900) = $23,620Therefore, the correct answer is B) $23,620.

The Following Data Has Been Assembled for John Company The Expected Total Cost at an Operating Level of 1,900