Question

fremont which uses the high-low method reported total cost of $10 per unit its lowest production level, 5000 units. when production tripled to its highest level, the total cost per unit dropped to $5 variable cost per unit

Answer 1

Answer:

$2.50

Explanation:

Calculation for the estimation of   variable cost per unit

                        Units     Total cost

High method  15,000×$5  per units  =$75,000

(5,000*3)=15,000

Low  method  5,000*$10 per units=$50,000

Difference  10,000     $25,000  

Variable cost per unit =$25,000/10,000

Variable cost per unit=$2.50

Note: Based on the information given we were told that production tripled to its highest level which means the high method units will be 15,000 units (5,000 units*3)

Therefore Fremont would estimate its variable cost per unit as: $2.50