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

What is the estimated total cost when 1,900 machine-hours are used?
A)$509,600
B)$290,000
C)$489,700
D)$157,700

Question

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

What is the estimated total cost when 1,900 machine-hours are used?
A)$509,600 
B)$290,000 
C)$489,700 
D)$157,700

Quizplus · Accepted Answer

Slope = ($332,000 - $312,000)/ (4,000 - 3,000)= $20.00
Constant (using highest observation): $332,000 - ($20.00 x 4,000)hours = $252,000
Constant (using lowest observation): $312,000 - ($20.00 x 3,000)hours = $252,000
The total cost,y = $252,000 + ($20.00 × 1,900)= $290,000

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