In applying the high-low method, what is the unit variable cost? $$\begin{array} { l c c }
\text { Month } & \text { Miles } &\text { Total Cost } \
\text { January } & 80,000 & \$ 192,000 \
\text { February } & 50,000 & 160,000 \
\text { March } & 70,000 & 188,000 \
\text { April } & 90,000 & 260,000
\end{array}$$
A)$2.88
B)$2.50
C)$3.20
D)Cannot be determined from the information given.

Question

In applying the high-low method, what is the unit variable cost? $$\begin{array} { l c c } 
\text { Month } & \text { Miles } &\text { Total Cost } \
\text { January } & 80,000 & \$ 192,000 \
\text { February } & 50,000 & 160,000 \
\text { March } & 70,000 & 188,000 \
\text { April } & 90,000 & 260,000
\end{array}$$
A)$2.88
B)$2.50
C)$3.20
D)Cannot be determined from the information given.

Quizplus · Accepted Answer

The high-low method calculates the variable cost per unit by taking the difference in total costs between the highest and lowest activity levels and dividing by the difference in activity levels. Here, the highest activity is 90,000 miles with a cost of $260,000, and the lowest is 50,000 miles with a cost of $160,000. The variable cost per mile is ($260,000 - $160,000) / (90,000 - 50,000) = $2.50.

In Applying the High-Low Method, What Is the Unit Variable