What is the variable cost per hour using the high-low method to estimate the cost equation?
A)$9.00.
B)$7.50.
C)$0.1333.
D)$0.1111.

Question

Quizplus · Accepted Answer

Using the high-low method, we need to identify the highest and lowest activity levels and corresponding costs. Let's assume those numbers are:

Highest activity level: 500 hours, cost: $4,000
Lowest activity level: 100 hours, cost: $1,250

The difference in cost between the high and low levels is $2,750 ($4,000 - $1,250) and the difference in activity is 400 hours (500 - 100). The variable cost per hour can be calculated by dividing the cost difference by the activity difference:

$2,750 / 400 hours = $6.875 per hour

Therefore, the correct answer is B: $7.50, which is the rounded-up answer to the nearest penny.

What Is the Variable Cost Per Hour Using the High-Low