Elm Uses the High-Low Method of Estimating Costs

question 86

Multiple Choice

Elm uses the high-low method of estimating costs.Elm had total costs of $250,000 at its lowest level of activity,when 5,000 units were sold.When,at its highest level of activity,sales equaled 10,000 units,total costs were $390,000.Elm would estimate variable cost per unit as:

• A)$70.00
• B)$45.50
• C)$28.00
• D)$52.71

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Definitions:

Depreciation Expense

The allocation of an asset's cost over its useful life, reflecting the asset's consumption, wear, and tear.

Dividends Paid

The total amount of earnings distributed by a company to its shareholders as a reward for their investment.

Inventory Increase

This occurs when there is a rise in the quantity or value of goods held by a company, signaling a buildup of stock.

Amortization of Patents

The systematic reduction of the financial value of a patent over its useful life, reflecting its consumption and obsolescence.