ExpertEasy2 marksShort Answer
ACCA · Question 11 · Syllabus B: Data analysis and statistical techniques
A data center tracks its electricity costs against the number of servers running.
In March (highest activity), 8,000 servers were running, and total electricity cost was $45,000.
In June (lowest activity), 5,000 servers were running, and total electricity cost was $33,000.
Using the high-low method, calculate the variable electricity cost per server. (Enter number only, no commas or symbols)
A data center tracks its electricity costs against the number of servers running.
In March (highest activity), 8,000 servers were running, and total electricity cost was $45,000.
In June (lowest activity), 5,000 servers were running, and total electricity cost was $33,000.
Using the high-low method, calculate the variable electricity cost per server. (Enter number only, no commas or symbols)
How to approach this question
Variable cost per unit = (Highest Cost - Lowest Cost) / (Highest Activity - Lowest Activity).
Full Answer
Variable Cost per unit = Change in Cost / Change in Activity
Change in Cost = $45,000 - $33,000 = $12,000
Change in Activity = 8,000 - 5,000 = 3,000 servers
Variable Cost per server = $12,000 / 3,000 = $4.
Common mistakes
Dividing the highest cost by the highest activity ($45,000 / 8,000 = $5.625), which ignores fixed costs.
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