Question

Wallace Heating is attempting to estimate the production cost for heating ducts for the coming year using the high-low method. The cost driver is number of labor hours. Wallace determines that the high and low costs are $25,830 and $18,414, respectively, and the values for the cost driver are 3,495 and 1,958 hours, respectively. What is the variable cost per hour

Answer 1

Answer:

Variable cost per hour= $4.825

Explanation:

Giving the following information:

Wallace determines that the high and low costs are $25,830 and $18,414, respectively, and the values for the cost driver are 3,495 and 1,958 hours, respectively.

To calculate the unitary variable cost under the high-low method, we need to use the following formula:

Variable cost per unit= (Highest activity cost - Lowest activity cost)/ (Highest activity units - Lowest activity units)

Variable cost per unit= (25,830 - 18,414) / (3,495 - 1,958)

Variable cost per unit= $4.825