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High-lost linear cost estimation.

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16 The Wildcat Company has provided the following information:

Units of Output 30,000 Units 42,000 Units
Direct materials $ 180,000 $ 252,000
Workers' wages 1,080,000 1,512,000
Supervisors' salaries 312,000 312,000
Equipment depreciation 151,200 151,200
Maintenance 81,600 110,400
Utilities 384,000 528,000
Total $2,188,800 $2,865,600

Using the high-low method and the information provided above,

a. identify the linear cost function equation and
b. estimate the total cost at 36,000 units of output.

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Solution Summary

The problem deals with utilizing provided cost information for deriving a linear cost equation.

The method used, for deriving the cost equation, is the High-low method.

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Solution provided by:
Chidi Ngene, M. Sc.
Education
  • B. Sc., University of Nigeria
  • M. Sc., London South Bank University
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