Given the following costs and activities for Falcon Company electrical costs, use the high-low method to calculate Falcon's variable electrical costs per machine hour. Costs Machine Hours April $3,100 15,000 May 2,700 10,000 June 3,500 18,000 a.$0.77 per unit b.$0.10 per unit c.$10.00 per unit d.$0.56 per unit

Question

Business

Alessandra Perkins

26 October, 16:28

Given the following costs and activities for Falcon Company electrical costs, use the high-low method to calculate Falcon's variable electrical costs per machine hour. Costs Machine Hours April $3,100 15,000 May 2,700 10,000 June 3,500 18,000 a.$0.77 per unit b.$0.10 per unit c.$10.00 per unit d.$0.56 per unit

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Answers (1)

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Julien · Answer 1

The variable cost per unit is $0.10. So, option b is the correct answer.

Explanation:

The mixed cost is a cost that has a component of both the fixed and the variable cost. To separate the components of the mixed costs, we use the high-low method to calculate the variable cost per unit component of a mixed cost. The formula for high-low method is,

Variable cost per unit = (Cost at highest activity level - Cost at lowest activity level) / (Highest activity level units - lowest activity level units)

Variable cost per unit = (3500 - 2700) / (18000 - 10000)

Variable cost per unit = $0.1 per unit