Joe, Jeff and Jerry Frank own Frank Brothers Farm, a seed company specializing in seed corn. At their weekly meeting they tried to calculate the portion of the farm's overhead expenses that is fixed and the portion that is variable. Over the past twelve months, the number of bushels of seed corn that has been sold reached its peak in May, when the total monthly overhead costs totaled $255,000 for 100,000 bushels of seed corn sold. The lowest number of bushels sold in the last twelve months occurred in December, when total overhead costs were $75,000 for 4500 bushels sold. What was the variable cost per yard?
A)$0.53
B)$1.88
C)$16.67
D)$2.55

Question

Quizplus · Accepted Answer

To find the variable cost per bushel, use the high-low method. The change in cost divided by the change in quantity gives the variable cost per unit: ($255,000 - $75,000) / (100,000 - 4,500) = $1.88 per bushel.

Joe, Jeff and Jerry Frank Own Frank Brothers Farm, a Seed