Technical Problems

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  1. avatar says

    Sir, help?
    This year, the output is 5000 units and the overhead cost is $31000. Three years ago, the output was 2000 units and the overhead cost is $8800. The price index was 132 three years ago and is 164 this year. Using the high-low technique, what is the variable cost per unit (to the nearest $0.01) expressed in current year prices?

    (answer is $6.69) i got this question from the revision mock exam.

    • Avatar of John Moffat says

      You restate the cost 3 years ago in current price terms. It is $8,800 x 164/132 = $10,933

      Then you use the normal high/low approach.
      High is 5,000 units with cost $31,000
      Low is 2,000 units with cost $10,933

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