Elm uses the high-low method of estimating costs.Elm had total costs of $250,000 at its lowest level of activity,when 5,000 units were sold.When,at its highest level of activity,sales equaled 10,000 units,total costs were $390,000.Elm would estimate variable cost per unit as:
A)$70.00
B)$45.50
C)$28.00
D)$52.71

Question

Quizplus · Accepted Answer

The variable cost per unit can be calculated using the high-low method by taking the difference in costs between the high and low levels of activity and dividing it by the difference in units sold at these levels. Here, the difference in costs is $390,000 - $250,000 = $140,000, and the difference in units sold is 10,000 - 5,000 = 5,000 units. Therefore, the variable cost per unit is $140,000 / 5,000 = $28.00.

Elm Uses the High-Low Method of Estimating Costs