Final answer:
The variable cost per ice cream cone using the high-low method cannot be calculated without specific data on costs and quantity. Instead, we reviewed the concept with an example of calculating the average variable cost for haircuts, which is key to business decision-making.
Step-by-step explanation:
To calculate the variable cost per ice cream cone using the high-low method, you would need to identify the periods with the highest and lowest levels of activity (number of ice cream cones sold) and the total variable costs associated with those periods. However, given that your question doesn't provide specific data about the cost of producing ice cream cones or the quantity produced, we cannot proceed with the high-low method calculation. Instead, let's understand the concept using the provided example for haircuts.
The average variable cost is obtained by dividing the variable cost by the quantity of output. In the example, the variable cost of producing 80 haircuts is $400, so the average variable cost is $400/80, which equals $5 per haircut. As output increases, the importance of fixed costs diminishes, which tends to decrease the average total cost making it closer to the average variable cost.
If a business needs to decide whether to continue operating or shut down, it looks at whether the price it can charge is above or below the average variable cost. If the price falls below the minimum average variable cost, it may be best for the firm to shut down, which is why understanding average variable cost is crucial for decision-making.