The Controller of Fortnight Co Using the High-Low Method to Develop a Cost Estimating Equation

question 94

Multiple Choice

The controller of Fortnight Co. has requested a quick estimate of the manufacturing supplies needed for the Cleveland Plant for the month of July, when production is expected to be 470,000 units to meet the ending inventory requirements and sales of 475,000 units. Fortnight Co.'s budget analyst has the following actual data for the last three months.
$\begin{array}{llr}&\text { Production in }\\\text {Month}&\text {Units}&\text { Manufacturing Supplies}\\\text { March } & 450,000 & \$ 723,060\\\text { April } & 540,000 & 853,560\\\text { May } & 480,000 & 766,560\end{array}$

Using the high-low method to develop a cost estimating equation, the total estimated cost of needed manufacturing supplies for July would be: (CMA adapted)

• A) $681,500.
• B) $688,750.
• C) $749,180.
• D) $752,060.

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Definitions:

Job Structure

The hierarchical arrangement of jobs within an organization that illustrates the comparative levels of responsibility, skill requirements, and the relationship between various jobs.

Pay Level

The average amount of compensation or salary given to employees in a certain position or job category.

Pay Structure

The system or arrangement outlining how employees are compensated, including salary ranges, grades, and levels, based upon their role, experience, and performance.

Benchmarking

The process of comparing one's business processes and performance metrics to industry bests or best practices from other companies.