Taunton Company uses the high-low method to estimate its cost function.The information for 2017 is provided below:

What is the constant for the estimated cost equation?
A)$277,500
B)$300,000
C)$165,000
D)$135,000

Question

Taunton Company uses the high-low method to estimate its cost function.The information for 2017 is provided below:

What is the constant for the estimated cost equation?
A)$277,500 
B)$300,000 
C)$165,000 
D)$135,000

Quizplus · Accepted Answer

Slope = ($300,000 - $277,500)/ (3,000 - 2,500)= $45.00
Constant (using highest observation)= $300,000 − ($45.00 × 3,000 hours)= $165,000
Constant (using lowest observation)= $277,500 − ($45.00 × 2,500 hours)= $165,000

Taunton Company Uses the High-Low Method to Estimate Its Cost