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The following observations of output and cost have been made:
Output units Cost $
8000. 39400
20000. 68000It is known that at output levels above 15000 units, variable cost per unit drops by $1 per unit fo all subsequent units produced.
What is the variable cost for each unit of output above 15000 units?
Sir answer is 1.8,
In this question first they deduct 20000 by 15000 × $1 and add the diff with 68000 for total cost, that means sir we adjusted the fall per unit it mentions in questions and we do the high low method to find variable cost per unit it results in 2.8, but it deducts 1$ from that, why? We already adjusted, why are we deducting that again
The $2.80 is the variable cost for output levels below 15,000 units. The question asks for the variable cost when output is above 15,000 units, and that is $1 per unit lower.
(It was not deducted when doing the high low method. It was added because 68,000 + 5,000 would be the total cost if there had not been the drop of $1 per unit.)
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