Question

1. Presented below are the production data for the first six months of the year for the mixed costs incurred by Vertise Company;

Month	Cost	Units
January	$4,890	4,100
February	4,426	3,520
March	6,730	5,200
April	9,724	8,250
May	5,900	4,900
June	7,336	6,600

Vertise Company uses the high-low method to analyze mixed costs. How would the cost function be stated?

1. Y = $7,850 + $1.18X
2. Y = $2,388 + $1.12
3. Y = $5,298 + $1.19X
4. Y = $484 +$1.12X
5. None of the above

Answer 1

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

= (9724-4426)/(8250-3520) = 1.12

Fixed cost = 9724 - (8250*1.12) = 484

The equation would be

Y = 484 + 1.12X

Option D is the answer