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

question 15

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: $\begin{array} { | l | r | r | } \hline{ \text { Month } } & \text { Utilities } & \text { Machine Hours } \\\hline \text { January } & \$ 8,900 & 800 \\\text { February } & \$ 8,560 & 720 \\\text { March } & \$ 9,150 & \$ 10 \\\text { April } & \$ 9,560 & 920 \\\text { May } & \$ 9,825 & 950 \\\text { June } & \$ 9,350 & 900 \\\hline\end{array}$ Using the high-low method, the utilities cost associated with 980 machine hours would be:

• A)$9,900.
• B)$12,422.
• C)$12,812.
• D)$13,952.
• E)$15,044.

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Definitions:

Marginal Revenue

The extra revenue obtained by selling an additional unit of a product or service.

Demand Schedule

A table that lists the quantity of a good that consumers are willing to purchase at various prices.

Maximize Profits

The goal of businesses to achieve the highest possible level of profit through revenue maximization and cost minimization.