Figure 3-4
The following information is available for electricity costs for the last six months of the year:

-Refer to Figure 3-4. Using the high-low method, estimated variable cost per unit of production is
A) $1.75
B) $1.65
C) $1.53
D) $1.26

Question

Figure 3-4
The following information is available for electricity costs for the last six months of the year:
 
-Refer to Figure 3-4. Using the high-low method, estimated variable cost per unit of production is
A) $1.75 
B) $1.65 
C) $1.53 
D) $1.26

Quizplus · Accepted Answer

To calculate estimated variable cost per unit of production using the high-low method, we need to use the highest and lowest levels of production and their corresponding costs.

Highest level of production: 4,500 units (June) with a cost of $9,405
Lowest level of production: 2,000 units (October) with a cost of $4,090

Variable cost per unit = (Highest cost - Lowest cost) / (Highest production - Lowest production)
Variable cost per unit = ($9,405 - $4,090) / (4,500 units - 2,000 units)
Variable cost per unit = $5,315 / 2,500 units
Variable cost per unit = $2.126

Therefore, the estimated variable cost per unit of production is $2.126, which is closest to option B) $1.65.

Figure 3-4 the Following Information Is Available for Electricity Costs for the for the Last