Q14:

The following data pertains to activity and maintenance costs for two recent years:

Year 1: Activity level (6,000 units), Maintenance cost ($4,200)

Year 2: Activity level (11,125 units), Maintenance cost $6,250)

If the high-low method is used to separate fixed and variable components of the cost, which of the following statements is correct?

a.

The variable cost is $0.70 per unit of activity

b.

The variable cost is $2.50 per unit of activity

c.

The fixed cost is $2,050

d.

The fixed cost is $1,800