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 $31,000 for 35,000 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 $26,000 for 26,000 yards of mulch processed. What was the variable cost per yard? OA. $1.80 O B. S056 O C. $1.00 D. $0.89

Answer 1

B. $0.56

Step-by-step explanation:

In this question, we use the high low method for calculation of variable cost per yard

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

= (High overhead costs - low overhead costs) ÷ (High yards processed - low yards processed)

= ($31,000 - $26,000) ÷ (35,000- 26,000)

= $5,000 ÷ 9,000

= $0.56 per unit