Pelicans Ice is a snow cone stand near the local park. To plan for the future, Pelicans Ice wants to determine its cost behavior patterns. It has the following information available about its operating costs and the number of snow cones served. The variable cost per snow cone using the high-low method is
A)$1.20
B)$0.83
C)$0.90
D)$0.93

Question

Pelicans Ice is a snow cone stand near the local park. To plan for the future, Pelicans Ice wants to determine its cost behavior patterns. It has the following information available about its operating costs and the number of snow cones served.  The variable cost per snow cone using the high-low method is
A)$1.20 
B)$0.83 
C)$0.90 
D)$0.93

Quizplus · Accepted Answer

Using the high-low method, we need to identify the highest and lowest levels of activity and their corresponding costs. From the table, we can see that the highest level of activity is 2,500 snow cones with a cost of $3,025 and the lowest level of activity is 1,000 snow cones with a cost of $1,225.

Using these two data points, we can calculate the variable cost per snow cone:
Variable cost per snow cone = (highest cost - lowest cost) / (highest activity - lowest activity)
Variable cost per snow cone = ($3,025 - $1,225) / (2,500 - 1,000)
Variable cost per snow cone = $1,800 / 1,500
Variable cost per snow cone = $1.20

Therefore, the variable cost per snow cone using the high-low method is $1.20, so the best choice is B.

Pelicans Ice Is a Snow Cone Stand near the Local