Swanson and Associates presently leases a copy machine under an agreement that calls for a fixed fee each month and a charge for each copy made. Swanson made 7,000 copies and paid a total of $360 in March; in May, the firm paid $280 for 5,000 copies. The company uses the high-low method to analyze costs.
Swanson's variable cost per copy is:
A) $0.040.
B) $0.051.
C) $0.053.
D) $0.056.
E) None of the other answers is correct.

Question

Quizplus · Accepted Answer

The high-low method calculates the variable cost per unit by taking the difference in total costs between the high and low activity levels and dividing by the difference in the number of units. Here, ($360 - $280) / (7,000 - 5,000) = $80 / 2,000 = $0.040 per copy.

Swanson and Associates Presently Leases a Copy Machine Under an Agreement