Taunton Company Uses the High-Low Method to Estimate Its Cost

question 145

Multiple Choice

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

What is the estimated cost function for the above data?

• A) y = 332,000 + 83X
• B) y = 312,000 + 104X
• C) y = 252,000 + 20.00X
• D) y = 92.00X

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Definitions:

Absorption Costing

A costing technique that incorporates every element of manufacturing expenditure, such as direct materials, direct labor, along with variable and fixed manufacturing overheads, into the pricing of a product.

Product Unit Cost

The total cost associated with producing a single unit of a product, including direct and indirect costs.

Direct Labor

Labor costs directly tied to the production of goods or services, such as wages of workers on the assembly line.

Direct Materials

Raw materials that can be directly associated with the production of goods, forming a significant part of the finished product.