The following data pertains to activity and utility costs for two recent years: Using the high-low method,the cost formula for utilities is:
A)$1.50 per unit
B)$8,000 plus $0.50 per unit
C)$1.25 per unit
D)$6,000 plus $0.75 per unit

Question

The following data pertains to activity and utility costs for two recent years:  Using the high-low method,the cost formula for utilities is:
A)$1.50 per unit 
B)$8,000 plus $0.50 per unit 
C)$1.25 per unit 
D)$6,000 plus $0.75 per unit

Quizplus · Accepted Answer

Variable cost = Change in cost F1F1F1S1F1F1F10 Change in activity
= ($15,000 - $12,000) F1F1F1S1F1F1F10 (12,000 - 8,000) = $0.75
Fixed cost element = Total cost - Variable cost element
= $15,000 - ($0.75 F1F1F1S1F1F1F10 12,000) = $6,000
Therefore,the cost formula for total maintenance cost is $6,000 per period plus $0.75 per unit,or Y = $6,000 + $0.75X.

The Following Data Pertains to Activity and Utility Costs for Two