Section A

LogisSwift operates a fleet of delivery trucks. The total maintenance costs at 10,000 miles were $45,000, and at 20,000 miles were $75,000.
However, management notes that fixed costs step up by $5,000 when activity exceeds 15,000 miles.

Using the high-low method, what is the variable cost per mile?

To find the variable cost per unit using high-low with a step-up fixed cost, adjust the high cost to remove the step-up so fixed costs are comparable. Adjusted High Cost = $75,000 - $5,000 = $70,000. Variable Cost = (Adjusted High Cost - Low Cost) / (High Activity - Low Activity) VC = ($70,000 - $45,000) / (20,000 - 10,000) = $25,000 / 10,000 = $2.50 per mile.