The Frontive Company has assembled the following data pertaining to certain costs that cannot be easily...
- The Frontive Company has assembled the following data pertaining to certain costs that cannot be easily identified as either fixed or variable. Frontive Company has heard about a method of measuring cost functions called the high-low method and has decided to use it in this situation.
|
Cost |
Hours |
|
$24,700 |
5,000 |
|
26,000 |
5,500 |
|
34,000 |
7,500 |
|
45,370 |
10,300 |
|
38,000 |
9,500 |
What is the estimated total cost at an operating level of 9,000 hours?
- $40,300
- $39,644
- $44,460
- $35,100
- None of the above
Homework Answers
Variable cost per unit=[Total cost at highest level-Total cost at lowest level]/(Highest level-Lowest level)
=(45370-24700)/(10300-5000)
=$3.9 per hour
Hence Total fixed cost=45370-(3.9*10300)=5200
Hence estimated total cost=Total variable cost+Total fixed cost
=(3.9*9000)+5200
=$40300
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