The managerial accountant at Hampson Company reported the following information:

Question

The managerial accountant at Hampson Company reported the following information:

Use the high-low method to compute the difference of the Cost Driver: Machine Hours, the
Difference of the Indirect Manufacturing Labor, and the slope coefficient b for each machine hour.

A) 55; $855; $13.68
B) 75; $910; $14.85
C) 65; $905; $13.92
D) 85; $925; $15.65
E) 95; $950; $16.22

Cost Driver: Machine-Hours (X) Indirect Manufacturing Labor (Y) Highest observation cost driver 120 1750 Lowest observation cost driver 55 845 Difference ? ?

Explanation / Answer

Answer is: C) 65; $905; $13.92

Cost driver: Machine hours (X) Indirect manufacturing labour (Y) Highest observation cost driver 120 1750 Lowest observation cost driver 55 845 Difference 120-55 = 65 $1,750-$845 = $905 slope coefficient b for each machine hour ($905 / 65) $                                                                                                                         13.92

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