EXPO2020 Company has assembled the following data pertaining to certain costs in its machining department that cannot be easily identified as either fixed or variable. EXPO2020 has heard about a method of measuring cost functions called the high-low method and has decided to use it in this situation.

Month

Cost

Machine Hours

January

$40,000

3,600

February

38,500

3,000

March

36,280

3,300

April

38,000

3,500

May

69,850

5,850

June

45,000

4,250

Required:

Use the high-low method to determine the estimating cost function with machine hours as the cost driver.

State clearly the cost function for EXPO2020s machining department.

What is the estimated total cost at an operating level of 3,100 machine hours?