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CoursHeroTranscribedText: interest 25 High-low cost approach of cost function. Karil Teeze Building Lid is an estate developer based in The company's overhead costs fluctuate considerably from year to year according to the number of But labor-hours worked in the various building sites. The business has the following details for the first quarter of 2019: Level of Activity Low High Direct labor-hours 60,000 80,000 Total overhead costs K224,000 K282,000 The overhead costs consist of indirect materials, rent, and electrical installation. The company has ana- Ined the cost of 60,000 direct labor-hours level of activity and has determined that at this activity level, the cost exists in the following proportions: Factory Overhead Nature of Cost Amount (K) Indirect materials, Variable 90,000 Electrical installation, Mixed 54,000 Rent, Fixed 100,000 Total factory overhead cost 244,000 For planning purposes, the company wants to break down the electrical installation costs into its fixed and variable cost elements. 1. Determine how much of the K282,000 overhead costs at the high level of activity consists of electrical Required installation costs. 2. Use the high-low method to determine the fixed cost element for electrical installation costs. 3. State and solve the linear cost equation. 4. Comment on the pros and cons of high-low method

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