Fast Food College has recently opened a restaurant as part of its hospitality major. The manager gathered the following data from the first five weeks of operations. Knowing you are currently taking a managerial accounting course he has asked that you analyze the data.

-Using the high-low method, what is the variable cost per customer at Fast Food College's restaurant?
A) $22.40
B) $21.95
C) $20.00
D) $0.46

Question

Fast Food College has recently opened a restaurant as part of its hospitality major. The manager gathered the following data from the first five weeks of operations. Knowing you are currently taking a managerial accounting course he has asked that you analyze the data.
 
-Using the high-low method, what is the variable cost per customer at Fast Food College's restaurant?
A) $22.40 
B) $21.95 
C) $20.00 
D) $0.46

Quizplus · Accepted Answer

The high-low method is used to estimate the variable and fixed costs of a business. It involves taking the highest and lowest levels of activity and comparing the total costs at each level to determine the variable cost per unit. The variable cost per unit is calculated by subtracting the total cost at the lowest level of activity from the total cost at the highest level of activity, and then dividing by the difference in the number of units between these two levels. Without specific data on the highest and lowest levels of activity and their associated costs, the correct answer cannot be determined through calculation here. However, based on the options provided and typical cost structures in fast food, $20.00 as a variable cost per customer seems plausible, as it could represent the direct costs associated with serving each customer (e.g., food supplies, packaging). The other options are either too high to be the variable cost per customer in a fast food context (A and B) or too low to be realistic (D).

Fast Food College Has Recently Opened a Restaurant as Part