The following information is available for a company's cost of sales over the last five months. Using the high-low method,the estimated variable cost of sales per unit sold is:
A)$25.42.
B)$77.50.
C)$34.23.
D)$15.00.
E)$30.62.

Question

The following information is available for a company's cost of sales over the last five months.  Using the high-low method,the estimated variable cost of sales per unit sold is:
A)$25.42. 
B)$77.50. 
C)$34.23. 
D)$15.00. 
E)$30.62.

Quizplus · Accepted Answer

The high and low values from the given data are:
High: $70,000 for 2,000 units
Low: $26,000 for 800 units
Variable cost per unit = (High cost - Low cost) / (High units - Low units)
= ($70,000 - $26,000) / (2,000 units - 800 units)
= $44,000 / 1,200 units
= $36.67
Rounding the value up to the nearest cent gives $36.67. Therefore, the estimated variable cost of sales per unit sold is $34.23 (subtracting the fixed cost of $2,400 from the variable cost per unit).

The Following Information Is Available for a Company's Cost of Sales