Question

Utility cost is a mixed cost with both fixed and variable components. using the highlow method, the cost formula for utility cost is:

Answer 1

Based on the question, a table was found to supplement the needed data.

Problem: Found the utility cost

Given: 
Based on the given table             Units           Utility Cost

High-Level Activity                      $8,000         $8,000            
Low-level Activity                        $5000          $1,500

Mathematical Operation: multiplication, addition, subtraction and division

Solution:  Variable cost per unit (VSU), Change in Cost (CC), Cost in Activity (CA),  Fixed Cost  (FC), Variable Cost Element (VCE), Total Cost (TC) High-Level Activity Unit (HLAU)

VCU=  CC÷ CA
        = $1,500 ÷ 3,000 units
        = $0.50 per unit
Fixed cost = TC- (VCE [VCUx HLAU])
                  =  $8,000 - ($0.50 per unit × 8,000 units)
                  = $8,000 - $4,000
                  = $4,000

The Choices are:
A.Y = $1.00 X
B.Y = $1.25 X
C.Y = $4,000 + $0.50 X
D.Y = $1,500 + $1.25 X

The answer is A.