21) What is the constant for the estimating cost equation?

A) \$125,000

B) \$225,000

C) \$25,000

D) \$0

E) \$12,500

22) What is the estimate of the total cost when 1,100 machine-hours are used?

A) \$125,000

B) \$135,000

C) \$150,000

D) \$200,000

E) \$136,000

23) Munir Hassan, controller, gathered data on overhead costs and direct labour-hours over the past 12 months. List and discuss the different approaches Munir can use to estimate a cost function for overhead costs using direct labour-hours as the cost driver.

24) The managers of the production department have decided to use the production levels of 2009 and 2012 as examples of the highest and lowest years of operating levels. During 2009 the department used 280,000 litres of chemicals and during 2012 it used 240,000 litres. The department’s costs for 2009 were \$460,000, but only \$400,000 in 2012.

Required:

Using the high-low method determine the cost estimating equation for the department if litres of direct material are used as the cost driver?