Wuensch Inc., an escrow agent, has provided the following data concerning its office expenses: Management believes that office expense is a mixed cost that depends on the number of escrows completed. Note: Real estate purchases usually involve the services of an escrow agent that holds funds and prepares documents to complete the transaction.
Using the high-low method, the estimate of the variable component of office expense per escrow completed is closest to:
A) $45.44
B) $42.76
C) $88.22
D) $131.00

Question

Wuensch Inc., an escrow agent, has provided the following data concerning its office expenses:  Management believes that office expense is a mixed cost that depends on the number of escrows completed. Note: Real estate purchases usually involve the services of an escrow agent that holds funds and prepares documents to complete the transaction.
Using the high-low method, the estimate of the variable component of office expense per escrow completed is closest to:
A) $45.44 
B) $42.76 
C) $88.22 
D) $131.00

Quizplus · Accepted Answer

11eacbfc_c8b0_0f59_8ffe_fd82ab993c40_TB7552_00 Variable cost per unit = Change in cost ÷ Change in activity
= $2,523 ÷ 59 escrows
= $42.76 per escrow