Question 6

Time: 10 minutes

Total: 6 marks

Below are the processing costs of Darnell Products observed over the last 10 months:

Month

Units Produced

Processing Cost

1

7,500

$44,000

2

11,000

60,000

3

14,500

58,330

4

5,500

20,000

5

9,000

47,000

6

8,500

52,000

7

3,500

25,000

8

7,000

41,000

9

11,500

52,000

10

6,000

41,000

a.Use the high low method to determine the variable cost per unit and fixed cost per month. Express your results in the form of a linear equation y = a + bx.

b.Predict the total processing cost if 19,000 units are produced.