Question

Fulton and Sons, Inc. presently leases a copy machine under an agreement that calls for a fixed fee each month and a charge for each copy made. Fulton made 13,000 copies and paid a total of $470 in March; in May, the firm paid $420 for 10,000 copies. The company uses the high-low method to analyze costs.Fulton’s variable cost per copy is: (Round your final answer to 3 decimal places)A. $0.017.B. $0.028.C. $0.030.D. $0.033.E. None of the answers is correct.

Answer 1

Answer:

a.$0.017.

Explanation:

Fulton and Sons, Inc. use high-low method to calculate costs. This is one of the methods to estimate cost. This method analyzes high level of activity and low level of activity and then compares it with cost at each level of activity. The variable cost per copy will be calculated by the formula given below,  

The variable cost per copy = (High Cost - Low cost) / (High units - Low units)  

= $470 - $420 / 13,000 - 10,000  

= $50 / 3000  

= $0.017 per copy.