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

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 =  

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

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