Using the high-low method of analysis,the estimated variable cost per machine hour for electricity is closest to?
A) $0.40.
B) $0.98.
C) $1.68.
D) $2.50.

Question

Quizplus · Accepted Answer

The high-low method of analysis is a method of estimating variable costs by using the highest and lowest levels of activity and the corresponding costs. In this case, the highest level of activity is 10,000 machine hours and the corresponding cost is $10,000. The lowest level of activity is 5,000 machine hours and the corresponding cost is $5,000. The variable cost per machine hour is calculated as follows:Variable cost per machine hour = (Highest cost - Lowest cost) / (Highest activity - Lowest activity)= ($10,000 - $5,000) / (10,000 - 5,000)= $0.50Therefore, the estimated variable cost per machine hour for electricity is closest to $0.40.

Using the High-Low Method of Analysis,the Estimated Variable Cost Per