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Time Output Overhead
units) ($) cost Price index
2 years ago 1,000 3,700 121
current year 3,000 13,000 155
Using the high low technique, what is the variable cost per unit (to the nearest $0.01) expressed in current year
prices?
A $3.22
B $4.13
C $4.65
D $5.06please help
You need first to state both costs in current year prices.
For 3000 units, the cost is already in current year prices and is $13,000
For 1,000 units, to restate we use the index numbers and it is 3,700 x 155/121 = $4,740
Now you can use the high/low method as usual.
(The correct answer is B – $4.13)
@fatmath – you have calculated correctly, but at prices 2 years ago!
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