Pearson Electric Company Uses the High-Low Method to Analyze Mixed

question 19

Multiple Choice

Pearson Electric Company uses the high-low method to analyze mixed costs. The following information relates to the production data for the first six months of the year.How should the cost function be properly stated using the high-low method?

• A) Y = $6,025 + $2.00H.
• B) Y = $6,520 + $3.00H.
• C) Y = $6,085 + $2.00H.
• D) Y = $6,250 + $3.00H.

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Definitions:

Salvage Received

The amount of money or value received from selling or disposing of obsolete or excess inventory, equipment, or other assets.

Internal Rate Of Return

A metric used in capital budgeting to estimate the profitability of potential investments.

Discount Factor(s)

A multiplicative factor used to determine present value of future cash flows, reflecting the time value of money and risk of the cash flows.

Straight-Line Depreciation

A technique for distributing the expense of a physical asset across its lifespan in uniform yearly sums.