Wilson Corporation Wilson Corporation has the following data for use of its machinery
Refer to Wilson Corporation.Using the high-low method,compute the variable cost element.
A)$1.02
B)$.98
C)$1.31
D)$1.19

Question

Wilson Corporation Wilson Corporation has the following data for use of its machinery
 Refer to Wilson Corporation.Using the high-low method,compute the variable cost element.
A)$1.02 
B)$.98 
C)$1.31 
D)$1.19

Quizplus · Accepted Answer

The High-Low method formula is (change in cost)/(change in activity)
Taking the highest activity level and cost: 
Activity level: 8,000 units 
Cost: $10,000 
Taking the lowest activity level and cost: 
Activity level: 4,000 units 
Cost: $6,000 
Therefore, the change in activity is 8,000 - 4,000 = 4,000 units 
And the change in cost is $10,000 - $6,000 = $4,000

Using the formula, we get: 
Change in cost/change in activity = $4,000/4,000 units = $1

Therefore, the variable cost element is $1 per unit.

The closest choice is B) $.98, which is within a reasonable range of the calculated variable cost element of $1 per unit.

Wilson Corporation Wilson Corporation Has the Following Data for Use