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

question 5

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. $\begin{array}{llll}\text { Month } & \operatorname{Cost}(\mathrm{Y}) &\operatorname{Hours}(\mathrm{H}) \\\text { January } & \$ 7,300 & 260 \\\text { February } & \$ 9,125 & 730 \\\text { March } & \$ 7,540 & 410 \\\text { April } & \$ 7,485 & 330 \\\text { May } & \$ 9,460 & 980 \\\text { June } & \$ 9,030 & 705\end{array}$ What is the estimated total cost at an operating level of 1,180 hours, using the high-low method?

• A) $10,060.
• B) $10,145.
• C) $10,015.
• D) $10,805.

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Definitions:

Expenses

Amounts used to generate revenue; assets used up or services consumed in the process of generating revenues.

Net Discounted Cash Flow

The value of all future cash flows of a project or investment after being discounted to the present value, reflecting both time and risk.

Cash Flowing

The movement of money in and out of a business, representing its operational liquidity.

Expenses

Costs incurred during the operation of a business that are necessary for generating revenue, such as rent, salaries, utilities, and materials.