Question: Shum Manufacturing, which uses the high-low method, makes a product called Kwan. The company incurs three different cost types (A, B, and C) and has

Shum Manufacturing, which uses the high-low method, makes a product called Kwan. The company incurs three different cost types (A, B, and C) and has a relevant range of operation between 2,500 units and 10,000 units per month. Per-unit costs at two different activity levels for each cost types are presented below.

Types AType BType CTotal

5,000units$5$12$5$22

7,500units58417

If Shum produces 10,000 units, the total cost would be:

Choices are:

  • $71,000.
  • $42,000.
  • $145,000.
  • $77,000.
  • None of the answers is correct.

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