Fantastic Feathers Ltd sells feather quilts and has never used CVP analysis in its 4‐year history. The manager provides you with the following sales and cost data for the first 4 years of operation.

Required
(a) Using the high-low method, estimate the cost function for the manufacture of quilts by Fantastic Feathers Ltd.
(b) Check whether the cost function you calculated in requirement A would represent the actual costs of manufacturing for 2024 and 2025. What does this tell you about the high-low method of estimating a cost function?

Transcribed Image Text:

Year Costs of manufacturing Number of quilts 2023 2024 $596 000 10 500 $698 750 11 750 2025 $809 000 13 500 2026 $895 000 16 250