Question

The following data pertain to activity and utilities costs for two recent years: Year 2 Year...

The following data pertain to activity and utilities costs for two recent years:

Year 2

Year 1

Activity Level in Units

15,000

12,000

Utilities Cost

$12,000

$8,000

Using the high-low method, what is the variable cost per unit for utilities?

Select one:

a. $1.25 per unit.

b. $0.75 per unit.

c. $1.33 per unit.

d. $1.50 per unit.

Business   Accounting   
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Homework Answers

Answer #1

Variable Cost per Unit = (Highest Activity Cost – Lowest Activity Cost)/ (Highest Activity Units – Lowest    Activity Units)

Highest Activity Cost       = 12000

Lowest Activity Cost        = 8000

Highest Activity Units     = 15000

Lowest    Activity Units = 12000

Variable Cost per Unit    = (12000-8000)/(15000-12000)

                                                = 1.33 per unit

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