The Macon Company Uses the High-Low Method to Determine Its

question 10

Multiple Choice

The Macon Company uses the high-low method to determine its cost equation. The following information was gathered for the past year:
$$\begin{array} { l c c } & \text { Machine } & \text { Direct Labor } \\ & \text { Hours } & \text { Costs } \\ \text { Busiest month (June) }& 14,000 & \$ 2 0 0 , 0 0 0 \\\text { Slowest month (December) }& 6,000 & \$ 120,000\end{array}$$
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If Macon expects to use 10,000 machine hours next month, what are the estimated direct labor costs?

• A) $160,000.
• B) $180,000.
• C) $175,000.
• D) $150,000.

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Definitions:

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