Chen Corp Uses the High-Low Method to Estimate How Its Costs

question 118

Multiple Choice

Chen Corp. uses the high-low method to estimate how its costs vary with levels of production. For the year, its high production was 50,000 units in a day, at a cost of $900,000, and its low production was 30,000 units, at a cost of $600,000. Its variable cost per unit is

• A) Zero
• B) 10
• C) 15
• D) 20

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Definitions:

Forward Exchange Contracts

Financial derivatives that lock in an exchange rate today for the purchase or sale of a currency on a future date.

Financial Instruments

Deals that create a financial asset for one entity and simultaneously generate either a financial liability or an equity instrument for another entity.

Accounts Payable

Liabilities to suppliers or creditors for goods, services, or supplies purchased on credit and not yet paid for.

Ordinary Shares

Shares of a company providing voting rights and entitling the holder to dividends, representing ownership in a corporation.