Georgia uses the high-low method of estimating costs.Georgia had total costs of $50,000 at its lowest level of activity,when 5,000 units were sold.When,at its highest level of activity,sales equaled 10,000 units,total costs were $78,000.Georgia would estimate variable cost per unit as:
A)$14.00
B)$9.10
C)$5.60
D)$10.54

Question

Quizplus · Accepted Answer

The variable cost per unit can be calculated using the high-low method by first determining the change in cost and the change in activity level. The change in cost is $78,000 - $50,000 = $28,000. The change in activity level is 10,000 units - 5,000 units = 5,000 units. Therefore, the variable cost per unit is $28,000 / 5,000 units = $5.60.

Georgia Uses the High-Low Method of Estimating Costs