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

correct option is C. ​$8,179

Step-by-step 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 =
`(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