. The controller of JoyCo has requested a quick estimate of the manufacturing su

Question

. The controller of JoyCo has requested a quick estimate of the manufacturing supplies needed for the month of July when production is expected to be 470,000 units. Below are actual data from the prior three months of operations.

Using these data and the high-low method, what is the best estimate of the cost of manufacturing supplies that would be needed for July? (Assume that this activity is within the relevant range.)

a. $805,284
b. $1,188,756
c. $755,196
d*. $752,060

Production in Units Manufacturing Supply March 450,000 $723,060 April 540,000 $853,560 May 480,000 $766,560

Explanation / Answer

d*. $752,060

Variable Cost using high low method = (Total cost at high quantity-total cost at low quantity)/(high quantity-low quantity) = (853560-723060)/(540000-450000) = 1.45 on 450000 unit Total Cost 723060 Less : Variable Cost 450000*1.45 652500 Fixed Cost 70560 So, the best estmited cost of 470000 units are as follows, Variable cost 470000*1.45 681500 Fixed cost   70560 Total 752060

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