The following information is available for a company's utility cost for operating its machines over the last four months.

$\begin{array} { | l | r | r | }
\hline \text { Month } & \text { Machine hours } & \text { Utility cost } \
\hline \text { January } & 900 & \$ 5,450 \
\hline \text { February } & 1,800 & \$ 6,900 \
\hline \text { March } & 2,400 & \$ 8,100 \
\hline \text { April } & 600 & \$ 3,600 \
\hline
\end{array}$
- Using the high-low method, the estimated variable cost per unit for utilities is:
A) $6.17.
B) $4.22.
C) $6.00.
D) $3.38.
E) $2.50.

Question

The following information is available for a company's utility cost for operating its machines over the last four months.  
 
$\begin{array} { | l | r | r | } 
\hline \text { Month } & \text { Machine hours } & \text { Utility cost } \
\hline \text { January } & 900 & \$ 5,450 \
\hline \text { February } & 1,800 & \$ 6,900 \
\hline \text { March } & 2,400 & \$ 8,100 \
\hline \text { April } & 600 & \$ 3,600 \
\hline
\end{array}$
- Using the high-low method, the estimated variable cost per unit for utilities is:
A) $6.17.
B) $4.22.
C) $6.00.
D) $3.38.
E) $2.50.

Quizplus · Accepted Answer

The high-low method calculates the variable cost per unit by taking the difference in costs between the highest and lowest activity levels and dividing by the difference in activity levels. Here, the highest cost is $8,100 at 2,400 hours, and the lowest cost is $3,600 at 600 hours. The variable cost per unit is ($8,100 - $3,600) / (2,400 - 600) = $2.50.

The Following Information Is Available for a Company's Utility Cost