The manager at Copley Mulch has been trying to calculate the portion of the company's overhead expenses that is fixed and the portion that is variable. Over the past twelve months, the number of square metres of mulch processed was highest in July, when the total monthly overhead costs totaled $6,000 for 25,000 square metres of mulch processed. The lowest number of square metres of mulch processed in the last twelve months occurred in October, when total overhead costs were $4,000 for 15,000 square metres of mulch processed. Use the high-low method to answer the following questions.
-What was the variable cost per square metre at Copely Mulch?
A) $5.00
B) $0.20
C) $0.24
D) $0.27

Question

Quizplus · Accepted Answer

The variable cost per square metre is calculated using the high-low method: (Cost at high activity level - Cost at low activity level) / (High activity level - Low activity level) = ($6,000 - $4,000) / (25,000 - 15,000) = $2,000 / 10,000 = $0.20 per square metre.

The Manager at Copley Mulch Has Been Trying to Calculate