The following data pertains to activity and utility cost for two recent periods:
Utility cost is a mixed cost with both fixed and variable components.Using the high-low method,the cost formula for utility cost is:
A) Y = $1.65 X
B) Y = $1.75 X
C) Y = $3,750 + $1.75 X
D) Y = $6,000 + $1.25 X

Question

The following data pertains to activity and utility cost for two recent periods:
 Utility cost is a mixed cost with both fixed and variable components.Using the high-low method,the cost formula for utility cost is:
A) Y = $1.65 X 
B) Y = $1.75 X 
C) Y = $3,750 + $1.75 X 
D) Y = $6,000 + $1.25 X

Quizplus · Accepted Answer

11ea7761_1886_02d0_81a5_97c0542970e6_TB2580_00 Variable cost per unit = Change in cost ÷ Change in activity
= $3,750 ÷ 3,000 units
= $1.25 per unit
Fixed cost = Total cost - Variable cost element
= $24,750 - ($1.25 per unit × 15,000 units)
= $24,750 - $18,750
= $6,000

The Following Data Pertains to Activity and Utility Cost for Two