Cardinal uses the high-low method of estimating costs.Cardinal had total costs of $25,000 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 $39,000.Cardinal would estimate variable cost per unit as:
A)$7.00
B)$4.55
C)$2.80
D)$5.26

Question

Quizplus · Accepted Answer

The variable cost per unit can be calculated using the high-low method by taking the difference in costs between the high and low levels of activity and dividing it by the difference in units sold at these levels. Here, ($39,000 - $25,000) / (10,000 units - 5,000 units) = $14,000 / 5,000 units = $2.80 per unit.

Cardinal Uses the High-Low Method of Estimating Costs