A soft drink bottler incurred the following factory utility cost: $3,611 for 700 cases bottled and $3,702 for 1,000 cases bottled. Factory utility cost is a mixed cost containing both fixed and variable components. The variable factory utility cost per case bottled is closest to:
A) $5.16
B) $0.30
C) $3.70
D) $3.61

Question

Quizplus · Accepted Answer

We can use the high-low method to determine the variable cost per case.

Variable cost per case = (Change in cost) / (Change in activity)

Using the information given:

Change in cost = $3,702 - $3,611 = $91
Change in activity = 1,000 - 700 = 300

Variable cost per case = $91 / 300 = $0.3033

Rounding to the nearest cent, the variable factory utility cost per case is $0.30. Therefore, the best choice is B.

A Soft Drink Bottler Incurred the Following Factory Utility Cost