Question
Canco Company is a very reputable in producing paddle boards for the last ten years. A manager of the production department collected the following information
Canco Company is a very reputable in producing paddle boards for the last ten years. A manager of the production department collected the following information for the last six months:
| Months | Machine Hours | Operating Costs |
| July | 8,000 | $61,000 |
| August | 9,200 | 66,000 |
| September | 7,600 | 60,000 |
| October | 8,800 | 64,000 |
| November | 9,000 | 65,000 |
| December | 7,900 | 61,500 |
Required:
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Determine the estimating cost function with machine-hours as the cost driver using the high-low method. (10 marks)
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If Decembers estimated machine-hours total 9,350, what is the estimated cost of the Production Department? (5 marks)
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What is the purpose of the high-low method? Explain briefly. (5 marks)
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Would you use this method in your business? Describe a situation when you would apply this method. (5 marks)
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Income Tax Fundamentals 2013
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
31st Edition
1111972516, 978-1285586618, 1285586611, 978-1285613109, 978-1111972516
