Sweetland Company, Which Uses the High-Low Method to Analyze Cost

question 54

Multiple Choice

Sweetland Company, which uses the high-low method to analyze cost behaviour, has determined that machine hours best explain the company's utilities cost. The company's relevant range of activity varies from a low of 700 machine hours to a high of 1,200 machine hours, with the following data being available for the first six months of the year: $\begin{array} { | l | r | r | } \hline { \text { Month } } & \text { Utilities } & \text { Machine Hours } \\\hline \text { January } & \$ 8,900 & 800 \\\text { February } & \$ 8,560 & 720 \\\text { March } & \$ 9,150 & \$ 10 \\\text { April } & \$ 9,560 & 920 \\\text { May } & \$ 9,825 & 950 \\\text { June } & \$ 9,350 & 900 \\\hline\end{array}$ The fixed utilities cost per month is:

• A)$4,600.
• B)$7,032.
• C)$7,422.
• D)$8,562.
• E)$9,564.

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Definitions:

Growth Rate

The rate at which a company's earnings, revenues, or other key metrics increase over a specified period.

Yield Rate

The return on investment over a particular period, expressed as a percentage, often annualized.

Strip Bond

A kind of bond in which the main amount and the periodic interest payments are detached and marketed separately as zero-coupon bonds.

Strip Bond

A bond variant where the capital and ongoing interest payments are split and each sold as separate zero-coupon bonds.