Question

Cole is computing variable cost per unit using the high‐low method. The highest level of activity is 725 machine hours at a total cost of $1,900. The lowest level of activity is 225 machine hours at a total cost of $1,000. What is the variable cost per unit?

Answer 1

Variable cost per unit= $1.8

Step-by-step explanation:

Giving the following information:

The highest level of activity is 725 machine hours at a total cost of $1,900. The lowest level of activity is 225 machine hours at a total cost of $1,000.

To calculate the unitary variable cost, we need to use the highlow method:

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

Variable cost per unit= (1,900 - 1,000) / (725 - 225)

Variable cost per unit= $1.8