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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 was $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?
variable cost per unit : 31000- 8800/5000-2000= 7.4
then what…help please..You need to adjust the figures from 3 years ago to current prices before you do the high-low calculation.
At current prices, the 2,000 units would have cost 8800 x 164/132 = $10,933.
Now you can do the normal high low workings and the variable cost you arrive at will be at current prices.
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