Carson,which uses the high-low method,reported total costs of $24 per unit at its lowest activity level,when production equaled 10,000 units.When production doubled,at its highest activity level,the total cost per unit dropped to $15.Carson would estimate variable cost per unit as
A)$9.
B)$6.
C)negative $9.
D)negative $0.0009.

Question

Quizplus · Accepted Answer

The high-low method is used to separate fixed and variable costs in a mixed cost scenario.

Using the information given, we can calculate the total variable cost for the highest activity level:

Total cost at highest level = Fixed cost + Variable cost at highest level

$15 = Fixed cost + Variable cost at highest level

We already know the fixed cost at the lowest activity level is $24 per unit, so we can calculate the variable cost per unit:

Variable cost per unit = (Total cost at highest level - Fixed cost at lowest level) / (Units at highest level - Units at lowest level)

Variable cost per unit = ($15 - $24) / (10,000 units - 20,000 units)

Variable cost per unit = -$9 / -10,000

Variable cost per unit = $0.9

Therefore, the estimate for variable cost per unit is $0.9 or $6 (rounding up to the nearest cent). Option B is the best choice.

Carson,which Uses the High-Low Method,reported Total Costs of $24 Per