Share
Explore BrainMass

Cost estimation :High low method

The cafeteria at XYZ University has experienced the following costs and number of meals served from January through September of 200x: Month Cafeteria Costs/Meals Served January $35,800/9,800 February 34,400/9,000 March 36,920/9,800 April 38,280/10,200 May 44,805/13,500 June 34,700/9,200 July 36,344/9,695 August 43,882/12,211 September 41,128/11,523 The cost function derived using the high-low method, which can be used to estimate the costs of running the cafeteria is:

a. $10,733+$2.66X
b. $10,337 + $2.312X
c. $5,290+$2.312X
d. $13,590+$2.312X

Solution Preview

Hi,

High low method: In high low method two data points are identified, one with lowest and other with highest activity level values. The total production cost is noted for these values. Using the two data points slope or per unit cost for an activity. The slope is computed as difference between total production costs divided by difference between activity levels for the two data points. In the next ...

Solution Summary

Solution contains the cost function derived by using the high-low method, which can be used to estimate the costs of running the cafeteria .

$2.19