Question

The College of Business at Northeast College is accumulating data as a first step in the preparation of next year's budget development. One cost that is being looked at closely is administrative costs as a function of student credit hours. Data on administrative costs and credit hours for the past thirteen months are shown below:

Month	Administrative Costs				Credit Hours
July		$	129,901		850
August			83,093		427
September			225,940		1,704
October			216,634		1,312
November			258,383		1,621
December			185,049		1,424
January			219,617		1,651
February			245,360		1,685
March			209,702		1,376
April			192,045		1,435
May			250,578		1,672
June			170,898		732
July			128,527		627
Total		$	2,515,727		16,516
Average		$	193,517		1,270

The controller's office has analyzed the data and has given you the results from the regression analysis:

SUMMARY OUTPUT
Regression Statistics
Multiple R	0.9268636
R Square	0.859076100
Adjusted R Square	0.846264837
Standard Error	20,787.50165
Observations	13

ANOVA
	df	SS	MS	F	Significance F
Regression	1	28,976,388,996	28,976,388,996	-67.0563129	5.22932E-06
Residual	11	4,753,322,471	432,120,224.7
Total	12	33,729,711,467

	Coefficients	Standard Error	t Stat	P-value	Lower 95%	Upper 95%	Lower 95.0%	Upper 95.0%
Intercept	55,194.23940	17,848.58666	3.09235910	0.010242851	15,909.76503	94,478.7138	15,909.76503	94,478.7138
X Variable 1	108.8763555	13.29577754	8.188791907	5.22932E-06	79.61254647	138.140165	79.61254647	138.140165

If the controller uses the high-low method to estimate costs, the variable cost per credit hour is:

Multiple Choice

• $201.02.

• $111.86.

• $103.46.

• $82.23.

Answer 1

Variable cost = (Cost at highest activity - Cost at lowest activity) /(Highest activity-Lowest activity)

= (225,940 - 83,093)/(1704-427)

= 142,847/1277

= 111.86

Option B is the answer