E6-23A Use the high-low method (Learning Objective 4)

Zebra has never used CVP analysis in its 6-year production history. The manager provided the following sales and cost data for the first 6 years of operation:

Year Costs of manufacturing Units produced 2008.................................................................... $ 96,000 32,000 2009.................................................................... $ 96,500 33,500 2010.................................................................... $ 96,500 32,000 2011.................................................................... $ 97,000 34,000 2012.................................................................... $ 99,000 35,000 2013.................................................................... $102,000 36,000 Requirements 1. Using the high-low method, estimate the cost equation for the manufacture of the product.

2. Check whether the cost equation you calculated in requirement 1 would represent the actual costs of manufacturing from year 2011 to 2012. What does this tell you about the high-low method of estimating a cost equation?