Manchester Foundry produced 45,000 tons of steel in March at a cost of £1,150,000. In April, the
foundry produced 35,000 tons at a cost of £950,000. Using only these two data points, determine the
cost function for Manchester.
What is the slope?
We have these data points:
35,000 tons costs £950,000
45,000 tons costs £1,150,000
Notice the difference between the high of 45,000 tons produced and 35,000 tons produced is (45,000 tons - 35,000 tons) = 10,000 tons with a matching change in costs of (£1,150,000 - £950,000) = £200,000.
We can calculate the variable cost per ton at £20 per unit (£200,000 / ...
High-Low Method example and general explanation