Longberry Corporation Manufactures and Sells Party Items Let
a = Fixed Production Costs Per Month
B =

question 185

Multiple Choice

Longberry Corporation manufactures and sells party items. The following representative direct labor hours and production costs are provided for a four-month period: $\begin{array}{ccc}\text { Month } & \text { Direct Labor Hours } & \text { Production Costs }\\\hline\text { May } & 3,600 & \$ 15,000 \\\text { June } & 4,800 & 17,500 \\\text { July } & 6,000 & 20,000 \\\text { August } & 4,800 & 17,500 \\\text { Total } & 19,200 & \$ 70,000\end{array}$
Let
A = Fixed production costs per month
B = Variable production costs per direct labor hour
N = Number of months
X = Direct labor hours per month
Y = Total monthly production costs
S = Summation
Using the high-low method, what is the cost formula for estimating costs?

• A)Total cost = $20,000 + $2.08X
• B)Total cost = $7,500 + $2.08X
• C)Total cost = $5,000 + 2.08X
• D)Total cost = $2.08X

---

Definitions:

Periodic Inventory System

An inventory valuation method where the inventory count and cost of goods sold is determined at the end of the accounting period.

Terms 4/15, N/60

A commercial credit term indicating that a 4% discount is available if paid within 15 days, with the net (full) amount due within 60 days.

Discount Lost

The expense incurred when a company fails to take advantage of the early payment discounts offered by suppliers.

Gross Method

An accounting method for recording purchases at the invoice's gross amount before any trade discounts are subtracted.