Question

To calculate the variable cost per unit using the high-low method, the change in__________, Incorrect Unavailable is divided by the change in activit-----, Incorrect Unavailable. (Enter only one word per blank.)

Answer 1

The high-low method is used to calculate the variable cost per unit by determining the change in variable cost and dividing it by the change in activity level or output.

Step-by-step explanation:

The high-low method is used to calculate the variable cost per unit by determining the change in variable cost and dividing it by the change in activity level or output.

1. First, identify the highest and lowest levels of activity or output and their corresponding costs.
2. Next, subtract the lowest cost from the highest cost to find the change in variable cost.
3. Then, subtract the lowest activity level from the highest activity level to find the change in activity.
4. Lastly, divide the change in variable cost by the change in activity to calculate the variable cost per unit.

For example, let's say the highest level of activity is 1,000 units with a cost of $10,000, and the lowest level of activity is 500 units with a cost of $5,000. The change in variable cost is $10,000 - $5,000 = $5,000, and the change in activity is 1,000 units - 500 units = 500 units. Therefore, the variable cost per unit is $5,000 / 500 units = $10 per unit.