Callander Corporation is a wholesaler that sells a single product. Management has provided the following cost data for two levels of monthly sales volume. The company sells the product for $140.50 per unit. The best estimate of the total variable cost per unit is: (Round your intermediate calculations to 2 decimal places.)

A) $82.90
B) $128.50
C) $104.00
D) $125.00

Question

Callander Corporation is a wholesaler that sells a single product. Management has provided the following cost data for two levels of monthly sales volume. The company sells the product for $140.50 per unit.

The best estimate of the total variable cost per unit is: (Round your intermediate calculations to 2 decimal places.)

A) $82.90
B) $128.50
C) $104.00
D) $125.00

Morgan Barnard · Accepted Answer

Final Answer : C, Explanation :  Using the high-low method:Variable cost per unit = (Total cost at high sales volume - Total cost at low sales volume) / (High sales volume - Low sales volume)Variable cost per unit = ($210,225 - $158,625) / (2,025 - 1,350)Variable cost per unit = $51,600 / 675Variable cost per unit = $76.44Therefore, the best estimate of the total variable cost per unit is $76.44. Adding this to the fixed cost per unit from the high-low method ($64.56), we get a total cost per unit of $141.00. Since the selling price per unit is $140.50, the company is actually experiencing a loss per unit at this level of sales volume. However, in this scenario, the closest option is C, which is $104.00. It is important to note that the high-low method is just an estimation technique and may not provide accurate results if there are other factors affecting the cost.

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