The following information was available about supplies cost for the second quarter of the year: Using the high-low method, the estimate of supplies cost at 1,000 units of production is
A) $2,700.
B) $4,460.
C) $4,900.
D) $7,100.

Question

The following information was available about supplies cost for the second quarter of the year:  Using the high-low method, the estimate of supplies cost at 1,000 units of production is
A) $2,700. 
B) $4,460. 
C) $4,900. 
D) $7,100.

Quizplus · Accepted Answer

To use the high-low method, we need to find the highest and lowest production levels and their corresponding costs. Using the information provided, we can calculate the variable cost per unit using the following formula:

Variable cost per unit = (Highest cost - Lowest cost) / (Highest production - Lowest production)
Variable cost per unit = ($5,200 - $2,600) / (2,400 - 800) = $900

Next, we can use the variable cost per unit to estimate the cost for 1,000 units of production:

Supplies cost = Variable cost per unit x Units of production
Supplies cost = $900 x 1,000 = $4,500

Therefore, the closest estimate to $4,500 is option B: $4,460.

The Following Information Was Available About Supplies Cost for the Second