The following data pertains to activity and utility cost for two recent periods: Utility cost is a mixed cost with both fixed and variable components.Using the high-low method, the cost formula for utility cost is:

Question

The following data pertains to activity and utility cost for two recent periods:  Utility cost is a mixed cost with both fixed and variable components.Using the high-low method, the cost formula for utility cost is:

Quizplus · Accepted Answer

11ea7998_5e30_d64b_911b_1754e9b91609_TB2627_00_TB2627_00 Variable cost per unit = Change in cost ÷ Change in activity
= $3,750 ÷ 3,000 units
= $1.25 per unit
Fixed cost = Total cost - Variable cost element
= $24,750 - ($1.25 per unit × 15,000 units)
= $24,750 - $18,750
= $6,000

The Following Data Pertains to Activity and Utility Cost for Two