Asked by Meliza Acosta on Jun 29, 2024
Verified
The following data pertains to activity and utility cost for two recent periods: 
Utility cost is a mixed cost with both fixed and variable components.Using the high-low method, the cost formula for utility cost is:
A) Y = $1.65 X
B) Y = $1.75 X
C) Y = $3,750 + $1.75 X
D) Y = $6,000 + $1.25 X
High-low Method
An approach used in cost accounting to determine the variable and fixed components of a cost by analyzing the highest and lowest levels of activity.
Utility Cost
The expense incurred for using utilities such as electricity, water, and natural gas in a business operation.
- Utilize the high-low method for estimating variable and fixed cost elements from provided data.
- Investigate mixed costs utilizing techniques including the high-low approach, least-squares regression, and examination of accounts.
Verified Answer
JC
Jessica CockrellJul 01, 2024
Final Answer :
D
Explanation : 
Variable cost per unit = Change in cost ÷ Change in activity
= $3,750 ÷ 3,000 units
= $1.25 per unit
Fixed cost = Total cost - Variable cost element
= $24,750 - ($1.25 per unit × 15,000 units)
= $24,750 - $18,750
= $6,000
Variable cost per unit = Change in cost ÷ Change in activity= $3,750 ÷ 3,000 units
= $1.25 per unit
Fixed cost = Total cost - Variable cost element
= $24,750 - ($1.25 per unit × 15,000 units)
= $24,750 - $18,750
= $6,000
Learning Objectives
- Utilize the high-low method for estimating variable and fixed cost elements from provided data.
- Investigate mixed costs utilizing techniques including the high-low approach, least-squares regression, and examination of accounts.
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