Holly,which uses the high-low method,had an average cost per unit of $10 at its lowest level of activity when sales equaled 10,000 units and an average cost per unit of $6.50 at its highest level of activity when sales equaled 20,000 units.Holly would estimate fixed costs as
A)$70,000.
B)$16.50.
C)$8.25.
D)$100,000.

Question

Quizplus · Accepted Answer

The high-low method calculates fixed costs by taking the difference in total costs at the highest and lowest activity levels and dividing by the change in activity level to find variable cost per unit. Then, fixed costs are found by subtracting total variable costs from total costs at either activity level. Here, fixed costs are $70,000.

Holly,which Uses the High-Low Method,had an Average Cost Per Unit