Question

Presented below are the production data for the first six months of the year for the mixed costs incurred by Venus Company. Month Cost Units January ​$5,210 ​4,100 February ​$4,800 ​3,200 March ​$6,780 ​5,470 April ​$10,250 ​8,200 May ​$5,900 ​5,030 June ​$7,370 ​6,570 Venus Company uses the​ high-low method to analyze mixed costs. What is the estimated total cost at an operating level of​ 6,300 units?

A. ​$6,867
B. ​$9,450
C. ​$8,179
D. ​$7,875

Answer 1

Answer:

correct option is C. ​$8,179

Explanation:

given data

Month              Cost         Units

January ​          $5,210      ​4,100

February          ​$4,800 ​    3,200

March               ​$6,780 ​    5,470

April ​                 $10,250 ​   8,200

May ​                  $5,900 ​    5,030

June ​                 $7,370 ​     6,570

to find out

estimated total cost at an operating level

solution

we get here first b by highest and lowest values of the cost driver

b =  $\frac{10250-4800}{8200-3200}$

b = $1.09

and a will be

$10,250 = a + ( 1.09 × 8,200 )

a = $1312

so Cost function is Y will be

Cost function is Y = a + bx

Y = $1312 + $1.09 ( x )

Y = $1312 + $1.09 ( 6300 )

Y = $8179

so correct option is C. ​$8,179