Reference no: EM133185065

Question - High-Low Method - Castanza Company produces computer printers. Management wants to estimate the cost of production equipment used to produce printers. The company reported the following monthly cost data related to production equipment:

Reporting Period (Month)	Total Costs	Machine Hours
January	$920,000	45,000
February	600,000	25,000
March	500,000	20,000
April	1,100,000	90,000
May	1,140,000	95,000
June	620,000	30,000
July	880,000	38,000
August	910,000	48,000
September	1,060,000	78,000
October	960,000	51,000
November	1,400,000	96,000
December	980,000	54,000

Required -

a. Use the four steps of the high-low method to estimate total fixed costs per month and the variable cost per machine hour. State your results in the cost equation form Y = f + vX by filling in the dollar amounts for f and v.

b. What would Castanza Company's estimated costs be if it used 50,000 machine hours next month?

c. What would Castanza Company's estimated costs be if it used 15,000 machine hours next month? Why should you feel uncomfortable estimating costs for 15,000 machine hours?