The following information is available for electricity costs for the last six months of the year: $$\begin{array} { c c c }
\text { Month } & \text { Production Volume } & \text { Electricity Costs } \\hline
\text { February } & 1,000 & \$ 1,700 \
\text { March } & 2,200 & 4,000 \
\text { April } & 2,000 & 3,200 \
\text { May } & 1,630 & 3,100 \
\text { June } & 1,240 & 2,600 \
\text { July } & 1,340 & 3,020
\end{array}$$
Using the high-low method, what is the estimated variable cost per unit of production? (Round your answer to two decimal places.)
A)1.75
B)1.92
C)1.53
D)1.37

Question

The following information is available for electricity costs for the last six months of the year: $$\begin{array} { c c c } 
\text { Month } & \text { Production Volume } & \text { Electricity Costs } \\hline
\text { February } & 1,000 & \$ 1,700 \
\text { March } & 2,200 & 4,000 \
\text { April } & 2,000 & 3,200 \
\text { May } & 1,630 & 3,100 \
\text { June } & 1,240 & 2,600 \
\text { July } & 1,340 & 3,020
\end{array}$$
Using the high-low method, what is the estimated variable cost per unit of production? (Round your answer to two decimal places.)
A)1.75
B)1.92
C)1.53
D)1.37

Quizplus · Accepted Answer

The high-low method involves finding the difference in cost between the highest and lowest production levels and dividing it by the difference in production volume. The highest production volume is 2,200 units in March with a cost of $4,000, and the lowest is 1,000 units in February with a cost of $1,700. The difference in cost is $4,000 - $1,700 = $2,300, and the difference in production volume is 2,200 - 1,000 = 1,200 units. Therefore, the estimated variable cost per unit is $2,300 / 1,200 units = $1.92.

The Following Information Is Available for Electricity Costs for the Last