Question

The manager at Screaming Trees has been trying to calculate the portion of the​ company's overhead expenses that is fixed and the portion that is variable. Over the past twelve​ months, the number of yards of mulch processed was highest in​ July, when the total monthly overhead costs totaled $ 28 comma 000 for 37 comma 000 yards of mulch processed. The lowest number of yards of mulch processed in the last twelve months occurred in​ October, when total overhead costs were $ 22 comma 000 for 25 comma 000 yards of mulch processed. What was the variable cost per​ yard

Answer 1

The variable cost per​ yard is $0.50

Step-by-step explanation:

The computation of the variable cost per​ yard is shown below:

= (total monthly overhead costs - total overhead costs) ÷ (total monthly overhead costs - total overhead costs)

= ($28,000 - $22,000) ÷ ($37,000 - $25,000)

= $6,000 ÷ $12,000

= $0.50

We have to make the difference between the highest and the lowest overhead cost and then do the proportionate between them