Answer:
Variable cost per unit= $8.4
Explanation:
<u>First, we need to calculate the total cost for each level of machine hours:</u>
Low activity level:
Total cost= 22,000*33.4= $734,800
High activity level:
Total cost= 25,000*30.4= $760,000
<u>Now, we can determine the variable and fixed costs:</u>
Variable cost per unit= (Highest activity cost - Lowest activity cost)/ (Highest activity units - Lowest activity units)
Variable cost per unit= (760,000 - 734,800) / (25,000 - 22,000)
Variable cost per unit= $8.4
Fixed costs= Highest activity cost - (Variable cost per unit * HAU)
Fixed costs= 760,000 - (8.4*25,000)
Fixed costs= $550,000
Fixed costs= LAC - (Variable cost per unit* LAU)
Fixed costs= 734,800 - (8.4*22,000)
Fixed costs= $550,000
