Quantum Company Uses the High-Low Method to Estimate the Cost

question 50

Multiple Choice

Quantum Company uses the high-low method to estimate the cost function. The information for 2017 is provided below:

What is the estimated cost function for the above data?

• A) y = 26,000 + 62.00X
• B) y = 6,000 + 50.00X
• C) y = 36,000 + 60.00X
• D) y = 30,000 + 65.00X

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Definitions:

Fixed Costs

Fixed expenses that are unaffected by production or sales volumes, encompassing costs like rent, employee salaries, and insurance fees.

Variable Costs

Costs that change in proportion to the level of production or sales volume, such as raw materials and direct labor.

Break-even Sales

The amount of revenue required to cover both the variable and fixed costs of production, leading to a situation where a business makes neither profit nor loss.

Variable Costs

Costs that vary directly with the level of production output.