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5. [-/2 Points] DETAILS Question 5: Cost structure estimation month activity volume total costs in units Oct 80 $7,000 Nov 70 $7,100 Dec 100
5. [-/2 Points] DETAILS Question 5: Cost structure estimation month activity volume total costs in units Oct 80 $7,000 Nov 70 $7,100 Dec 100 $8,000 a) Which cost structure estimation method should we use? account classification method O high-low method b) To identify the low and high points, we should look for O lowest/highest activity lowest/highest costs c) Estimate the cost structure parameters: total FC= unit VC= Write down the total cost equation TC = + * volume d) Predict the total costs of producing 100 units: TC= e) Can we use the estimates from (c) to predict costs at volume of 5,000 units? YES: Just plug in volume=5,000 in the total cost equation. O NO: 5,000 units is outside the relevant range (the normal range of activity is around 70-100 units).
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