Question

A. At the high point of the relevant range, labour hours at Bradco Restoration were 10,000 and wages were $22,500. At the low point of the relevant range, labour hours were 7,500 and wages were $17,500.

Using the high-low method determine the slope coefficient per labour hour at Bradco Restoration?

B. At the high point of the relevant range, labour hours at Bradco Restoration were 10,000 and wages were $22,500. At the low point of the relevant range, labour hours were 7,500 and wages were $17,500.

Using the high-low method determine the fixed costs at Bradco Restoration?

C.At the high point of the relevant range, labour hours at Bradco Restoration were 10,000 and wages were $22,500. At the low point of the relevant range, labour hours were 7,500 and wages were $17,500.

What is the high-low estimate of the labour costs at Bradco Restoration when 8,000 hours are used?

Answer 1

• All working forms part of the answer
• Working

	Labor hours	Wages
High Level	10,000	$                   22,500.00
Low Level	7,500	$                   17,500.00
Difference	2,500	$                     5,000.00

• Requirement ‘a’ = $ 2 per labor hour

Difference in Cost	$                                                               5,000.00
Difference in wages	2,500
Wages per hour	$                                                                       2.00

• Requirement ‘b’ = $ 2,500

Working		High Level	Low Level
A	Total wages	$                 22,500.00	$                   17,500.00
B	Total hours	10000	7500
C	Variable cost per hour	$                           2.00	$                             2.00
D = B x C	Total Variable cost	$                 20,000.00	$                   15,000.00
E = A - D	Total Fixed Cost	$                   2,500.00	$                     2,500.00

• Requirement ‘c’

Estimated Labor cost at 8000 labor hours = $ 2500 fixed cost + ($2 x 8000 labor hours)
= 2500 + 16000
= $ 18,500 = Answer