Question 5: Cost structure estimation month activity volume in units total costs Oct 90 $7,425 Nov 70 $7,500 Dec 105 $9,250 a) Which cost structure estimation method should we use? account classification method high-low method b) To identify the low and high points, we should look for lowest/highest costs lowest/highest activity c) Estimate the cost structure parameters: total FC= unit VC= Write down the total cost equation TC = + * volume d) Predict the total costs of producing 80 units: TC = Enter a number e) Can we use the estimates from (c) to predict costs at volume of 5,000 units? YES: Just plug in volume=5,000 in the total cost equation. NO: 5,000 units is outside the relevant range (the normal range of activity is around 70-105 units)