The College of Business at Northeast College is accumulating data as a first ste

Question

The College of Business at Northeast College is accumulating data as a first step in the preparation of next year's budget development. One cost that is being looked at closely is administrative costs as a function of student credit hours. Data on administrative costs and credit hours for the past thirteen months are shown below:

The controller's office has analyzed the data and has given you the results from the regression analysis:

If the controller uses the high-low method to estimate costs, the variable cost per credit hour is:

a. $82.33.

b. $103.56.

c. $111.96.

d. $201.22.

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Month Administrative Costs Credit Hours July $ 129,301 250 August 82,613 115 September 225,580 1,392 October 216,394 1,000 November 258,263 1,309 December 184,449 1,112 January 219,137 1,339 February 245,000 1,373 March 209,462 1,064 April 191,925 1,123 May 249,978 1,360 June 170,418 420 July 128,167 315 Total $ 2,510,687 12,172 Average $ 193,130 936

Explanation / Answer

Solution:-

If the controller uses the high-low method to estimate costs, the variable cost per credit hour is:

c. $ 111.96.

Explanation:-

VC = ($225,580 - $82,613) / (1,392 - 115) = $ 111.96.

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