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ACCA · Question 06 · Data analysis and statistical techniques
A logistics company recorded the following maintenance costs and activity levels over the last four months:
Month 1: 12,000 miles, $45,000
Month 2: 15,000 miles, $51,000
Month 3: 10,000 miles, $41,000
Month 4: 18,000 miles, $57,000
Using the high-low method, calculate the variable maintenance cost per mile. (Enter the number only, to two decimal places, e.g., 1.50)
A logistics company recorded the following maintenance costs and activity levels over the last four months:
Month 1: 12,000 miles, $45,000
Month 2: 15,000 miles, $51,000
Month 3: 10,000 miles, $41,000
Month 4: 18,000 miles, $57,000
Using the high-low method, calculate the variable maintenance cost per mile. (Enter the number only, to two decimal places, e.g., 1.50)
How to approach this question
Identify the highest and lowest activity levels (miles). High: 18,000 miles ($57,000). Low: 10,000 miles ($41,000). Variable cost per unit = Change in cost / Change in activity.
Full Answer
High activity: 18,000 miles, Cost: $57,000. Low activity: 10,000 miles, Cost: $41,000.
Change in cost = $57,000 - $41,000 = $16,000.
Change in activity = 18,000 - 10,000 = 8,000 miles.
Variable cost per mile = $16,000 / 8,000 = $2.00.
Common mistakes
Using the highest and lowest costs instead of highest and lowest activity levels (though they align here, it's a bad habit).
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