Refer to the data in Problem 4.54. As an alternative to the detailed account analysis, management at Comfort Pillows desires to use the high-low method to estimate the variable cost associated with producing a pillow. The firm plans to add 25% to the variable cost to arrive at the price charged to the department store. Management of Comfort Pillows has provided you with the total costs associated with the highest (September) and lowest (March) monthly production volumes for the most recent year of operations.

Required:
a. Use the high-low method to estimate Comfort Pillows' monthly cost equation (i.e., use the high-low method to estimate Comfort Pillows' monthly fixed costs and variable cost per pillow produced).
b. Using the variable cost estimate, calculate the price per pillow that Comfort will charge the department store.
c. Explain why your answer to part (b) above differs from your answer to part(a) in Problem 4.54. Which of these two estimates do you believe is better/more reliable? Why?

Month March September Pillous Sold 10,000 ,000 Total Costs $420,000 $560,000 15