The Macon Company Uses the High-Low Method to Determine Its

question 16

Multiple Choice

The Macon Company uses the high-low method to determine its cost equation.The following information was gathered for the past year:
$$\begin{array} { | l | r | r | } \hline & \begin{array} { r } \text { Machine } \\\text { Hours }\end{array} & \begin{array} { r } \text { Direct Labor } \\\text { Costs }\end{array} \\\hline \text { Busiest month (June) } & 14,000 & \$ 200,000 \\\hline \begin{array} { l } \text { Slowest month } \\\text { (December) }\end{array} & 6,000 & \$ 120,000 \\\hline\end{array}$$
If Macon expects to use 10,000 machine hours next month,what are the estimated direct labor costs?

• A) $160,000.
• B) $180,000.
• C) $175,000.
• D) $150,000.

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