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Uninder Company uses the high-low method to estimate the cost function. The information for 2015 is...

Uninder Company uses the high-low method to estimate the cost function. The information for 2015 is provided below:

                                                                Machine-hours       Labor Costs

      Highest observation of cost driver                 550                   $22,000

      Lowest observation of cost driver                  250                  $ 13,000

What is the estimated total cost when 400 machine-hours are used?

  

a. $17,500

   

b. $29,000

   

c. $16,000

   

d. $20,800

Business   Accounting   
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Answer #1
a. $17,500
Machine-hours Labor Costs
Highest                     550 $22,000
Lowest                     250 $13,000
Differnce                     300 $9,000
Variable cost of sales = $30.00
($9,000/300)
Fixed cost $5,500
$22,000 - (550 x $30)
Total cost when 400 machine-hours are used $17,500
(400 x $30) + $5,500
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