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Hello Sir,
another one from me, please!
This year the output is 5,000 units and the o/h cost is $31,000. Price index is164.
Three years ago the output was 2,000 units and o/h $8,800. Price index was 132.
Using high-low technique, what is variable cost per unit expressed in current year prices.
Again, I don’t know how to get to the answer – $6.69. I went through the study materials and lectures but couldn’t work it out..
Thank you very much,
AigaFirst you need to restate the cost 3 years ago in current prices.
So in current prices, the cost will be 8,800 x 164/132 = $10,933.
Then you can apply the high low technique in the normal way.
(Using index numbers is covered in Chapter 19 of the Lecture notes together with the lecture that goes with it)
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