Explore BrainMass

Explore BrainMass

    Cost Function using High Low Method

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    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)

    © BrainMass Inc. brainmass.com June 3, 2020, 6:37 pm ad1c9bdddf
    https://brainmass.com/business/accounting/cost-function-using-high-low-method-68206

    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

    ADVERTISEMENT