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# Cost Function using High Low Method

I believe that I have done #1 correctly. I am confused as to how to figure out question #2. Please show all calculations used to arrive at the answer.

The number of X-rays taken and X-ray costs at a hospital over the last nine months are:

Month X-Rays Taken X-Ray Cost
January 6,250 \$28,000
February 7,000 29,000
March 5,000 23,000
April 4,250 20,000
May 4,500 22,000
June 3,000 17,000
July 3,750 18,000
August 5,500 24,000
September 5,750 26,000

1. Use high-low method, estimate the cost formula for X-ray costs.

29,000 17,000 = 12,000 = \$3.00
7,000 3,000 4,000

\$29,000
-21,000 (\$3.00 X 7,000 = 21,000)
\$ 8,000

2. Using the cost formula you derived above, what X-ray costs would you expect to be incurred during a month in which 4,600 X-rays are taken?

29,000 17,000 = 12,000 = \$5.00
7,000 4,600 2,400

\$29,000
35,000 (\$5.00 X 7,000 = 35,000)

#### Solution Preview

We first find the cost function. We take the highest and the lowest cost.
7,000 xrays cost 29,000
3,000 x rays cots 17,000
Then take the ...

#### Solution Summary

The solution explains how to derive the cost function using high low method and to use the cost function to calculate the total costs.

\$2.19