Question

Our company has reviewed the utilities bills for our company. We have determined that the highest and lowest bills were $5,600 and $3,200 for the months of January and September. If we produced 1,200 and 600 units in these months, what was the variable cost per unit associated with the utilities bill

Answer 1

Variable cost per unit= $4

Step-by-step explanation:

Giving the following information:

We have determined that the highest and lowest bills were $5,600 and $3,200 for January and September. We produced 1,200 and 600 units in these months.

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

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

Variable cost per unit= (5,600 - 3,200) / (1,200 - 600)

Variable cost per unit= $4