Thomas Train has collected the following information over the last six months.
Using the high-low method, what is the variable cost per unit?
Your Answer:
Please show workings... thanks
Solution
The variable cost per unit can be calculated with the use of total cost for the highest and lowest volume of activity during the past six months. The formula for calculating the variable cost per unit can be derived as follows:
Variable Cost Per Unit = (Total Cost at the Highest Units Produced - Total Cost at the Lowest Units Produced)/(Highest Units Produced - Lowest Units Produced)
____________
Here, Total Cost at the Highest Units Produced = $29,200, Total Cost at the Lowest Units Produced = $25,600, Highest Units Produced = 19,400 units and Lowest Units Produced = 10,000 units
Variable Cost Per Unit = (29,200 - 25,600)/(19,400 - 10,000) = .383 or .38 per unit (answer)
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Thomas Train has collected the following information over the last six.docx
1. Thomas Train has collected the following information over the last six months.
Using the high-low method, what is the variable cost per unit?
Your Answer:
Please show workings... thanks
Month Units produced Total costs
March 10,000 $25,600
April 12,000 26,200
May 19,400 29,200
June 13,000 26,450
July 12,000 26,000
August 15,000 26,500
Solution
The variable cost per unit can be calculated with the use of total cost for the highest and lowest
volume of activity during the past six months. The formula for calculating the variable cost per
unit can be derived as follows:
Variable Cost Per Unit = (Total Cost at the Highest Units Produced - Total Cost at the Lowest
Units Produced)/(Highest Units Produced - Lowest Units Produced)
____________
Here, Total Cost at the Highest Units Produced = $29,200, Total Cost at the Lowest Units
Produced = $25,600, Highest Units Produced = 19,400 units and Lowest Units Produced =
10,000 units
Variable Cost Per Unit = (29,200 - 25,600)/(19,400 - 10,000) = .383 or .38 per unit (answer)
