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Shum Manufacturing, which uses the high-low method, makes a product called Kwan. The company incurs three...

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 2,700 units and 12,000 units per month. Per-unit costs at two different activity levels for each cost type are presented below.

Type A Type B Type C Total
5,400 units $ 4 $ 7 $ 5 $ 16
8,100 units 5 9 4 18


The cost formula that expresses the behavior of Shum’s total cost is:

Multiple Choice

  • Y = $0 + $16X.

  • Y = $21,600 + $18X.

  • Y = $48,600 + $7X.

  • Y = $37,800 + $4X.

  • Y = $54,000 + $6X.

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