Cardinal Cleaners
Cardinal Cleaners documented the gallons of cleaning solvent it used as well as total overhead costs for the past five months as follows:
$$\begin{array} { l c c }
& \text { Number of gallons } & \text { Total overhead costs } \
\hline \text { July } & 160 & \$ 6500 \
\text { August } & 150 & 6100 \
\text { September } & 155 & 6700 \
\text { October } & 175 & 7000 \
\text { November } & 170 & 6800
\end{array}$$
-Using the high/low method,what is the variable cost per unit?

Question

Cardinal Cleaners
Cardinal Cleaners documented the gallons of cleaning solvent it used as well as total overhead costs for the past five months as follows:
$$\begin{array} { l c c } 
& \text { Number of gallons } & \text { Total overhead costs } \
\hline \text { July } & 160 & \$ 6500 \
\text { August } & 150 & 6100 \
\text { September } & 155 & 6700 \
\text { October } & 175 & 7000 \
\text { November } & 170 & 6800
\end{array}$$
-Using the high/low method,what is the variable cost per unit?

Quizplus · Accepted Answer

The high/low method involves finding the difference in costs between the highest and lowest activity levels and dividing it by the difference in activity levels. Here, the highest activity level is in October (175 gallons, $7000) and the lowest is in August (150 gallons, $6100). The difference in costs is $7000 - $6100 = $900, and the difference in gallons is 175 - 150 = 25 gallons. Therefore, the variable cost per unit is $900 / 25 gallons = $36 per gallon.

Cardinal Cleaners Cardinal Cleaners Documented the Gallons of Cleaning Solvent

Cardinal Cleaners
Cardinal Cleaners Documented the Gallons of Cleaning Solvent