Using the high-low method of analysis, the estimated variable electrical cost per machine hour is:
A)$0.65
B)$0.40
C)$0.70
D)$0.67

Question

Quizplus · Accepted Answer

The high-low method of analysis is used to estimate the variable cost per unit by dividing the difference between the total variable cost at the high activity level and the total variable cost at the low activity level by the difference between the high activity level and the low activity level. In this case, the total variable electrical cost at the high activity level is $1,000 and the total variable electrical cost at the low activity level is $500. The difference between the high activity level and the low activity level is 1,000 machine hours. Therefore, the estimated variable electrical cost per machine hour is ($1,000 - $500) / 1,000 = $0.50.

Using the High-Low Method of Analysis, the Estimated Variable Electrical