(Appendix 5A) Electrical costs at one of Rome Corporation's factories are listed below:
Management believes that electrical cost is a mixed cost that depends on machine-hours.
-Using the high-low method,the estimate of the variable component of electrical cost per machine-hour is closest to:
A) $2.11
B) $1.80
C) $2.21
D) $0.47

Question

(Appendix 5A) Electrical costs at one of Rome Corporation's factories are listed below:
  Management believes that electrical cost is a mixed cost that depends on machine-hours.
-Using the high-low method,the estimate of the variable component of electrical cost per machine-hour is closest to:
A) $2.11 
B) $1.80 
C) $2.21 
D) $0.47

Quizplus · Accepted Answer

11ea7761_188c_dfc4_81a5_53771dd357b1_TB2580_00 Variable cost per unit = Change in cost ÷ Change in activity
= $203 ÷ 96 machine-hours
= $2.11 per machine hour

(Appendix 5A) Electrical Costs at One of Rome Corporation's Factories