Question

The ABC Company had its highest level of production in May when they produced 4,000 units at a total cost of $110,000 and its lowest level of production in November when they produced 2,500 units at a total cost of $87,500. Using the high-low method, the estimated variable cost per unit is $

Answer 1

Answer:

$15

Explanation:

The computation of the estimated variable cost per unit by using high low method is shown below:

Variable cost per unit = (High total cost - low total cost) ÷ (Highest level activity  - lowest level activity)

= ($110,000 - $87,500) ÷ (4,000 units - 2,500 units)

= $22,500 ÷ 1,500 units

= $15

By applying the above formula we easily find the estimated variable cost per unit