A company is estimating its costs based on past information. The total costs incurred by the company at different levels of output were as follows:

Output ......................Total costs
(units) ...............................$
160 000 .....................2 420 000
185 000 .....................2 775 000
190 000 .....................2 840 000

The company uses the high–low method to separate total costs into their fixed and variable elements. Ignore inflation.
The estimated total costs for an output of 205 000 units is:
(a) $2 870 000
(b) $3 050 000
(c) $3 064 211
(d) $3 080 857
The company has now established that there is a stepped increase in fixed costs of $30 000 when output reaches 180 000 units.
The estimate of total costs for an output of 175 000 units using the additional information is:
(a) $2 645 000
(b) $2 275 000
(c) $2 615 000
(d) $2 630 000