Sterling Glass Company Uses the High-Low Method to Analyze Mixed

question 47

Multiple Choice

Sterling Glass 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?

• A)Y = $2,025 + $2.50H.
• B)Y = $3,890 + $2.00H.
• C)Y = $4,085 + $2.00H.
• D)Y = $5,260 + $2.50H. Unit variable cost = ($5,685 - $4,485)/(800 - 200)= $2.00.Fixed cost = $5,685 - (800 x $2.00)= $4,085 or $4,485 - (200 x $2.00)= $4,085

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Definitions:

Regression Equation

A mathematical formula used to describe the relationship between a dependent variable and one or more independent variables.

Correlation Coefficient

A numerical index that reflects the relationship between two variables, specifically how the value of one variable changes when the value of the other variable changes.

Prediction Error

The difference between observed values and the values predicted by a model, used as a metric to evaluate the accuracy of predictions.

Absolute Value

The non-negative value of a number disregarding its sign; representing its distance from zero on the number line.