Question

High-Low Method Ziegler Inc. has decided to use the high-low method to estimate the total cost and the fixed and variable cost components of the total cost. The data for various levels of production are as follows: Units Produced Total Costs 80,000 $25,100,000 92,000 27,206,000 120,000 32,120,000 a. Determine the variable cost per unit a

Answer 1

Variable cost per unit= $175.5

Step-by-step explanation:

Giving the following information:

Units Produced Total Costs

80,000 $25,100,000

92,000 $27,206,000

120,000 $32,120,000

To calculate the variable cost per unit under the high-low method, we need to use the following formula:

Variable cost per unit= (Highest activity cost - Lowest activity cost)/ (Highest activity units - Lowest activity units)

Variable cost per unit= (32,120,000 - 25,100,000) / (120,000 - 80,000)

Variable cost per unit= 7,020,000 / 40,000

Variable cost per unit= $175.5