Werner Brothers, Inc., used the high-low method to derive its cost formula for electrical power cost. According to the cost formula, the variable cost per unit of activity is $2 per machine-hour. Total electrical power cost at the high level of activity was $9,400 and at the low level of activity was $9,000. High level of activity was 2,200 machine hours.

Using cost function, Total cost = Total fixed cost + Total variable cost or Y=A+ b(X), you get fixed cost to equal $5,000

True

False

2 points

QUESTION 3

Werner Brothers, Inc., used the high-low method to derive its cost formula for electrical power cost. According to the cost formula, the variable cost per unit of activity is $2 per machine-hour. Total electrical power cost at the high level of activity was $9,400 and at the low level of activity was $9,000.

Using cost function, Total cost = Total fixed cost + Total variable cost or Y=A+ b(X), you get fixed cost to equal $5,000. Activity level when costs equal $9,400 are 2,200. The activity level for low level would 2,400 machine hours.

True

False

2 points

QUESTION 4

The cost formula for a company helps to break down total costs into total fixed and unit variable costs.

True

False