(Appendix 5A) 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

(Appendix 5A) 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

11ea7761_188c_6a91_81a5_bd487c3aa224_TB2580_00 Variable cost per unit = Change in cost ÷ Change in activity
= $2,523 ÷ 59 escrows
= $42.76 per escrow