Reference no: EM13484200

Precision Pumps and Valves Ltd. manufactures hydraulic components for mobile industrial equipment, such as excavators.  The firm's production volume fluctuates from month to month, causing sharp swings in the amount of resources that must be acquired each month (e.g., materials purchased, machinery leased).  Management would like to better understand the behaviour of its monthly overhead costs.  Because of the machinery-intensive nature of the firm's production, the firm uses machine hours as its overhead cost driver.  The monthly data for 2006 are as follows:

 

Month (2006)	Machine Hours	Overhead Cost
January	22,000	$   620,000
February	10,000	400,000
March	13,000	465,000
April	28,000	685,000
May	17,000	540,000
June	24,000	640,000
July	14,000	300,000
August	20,000	600,000
September	30,000	675,000
October	12,000	440,000
November	26,000	660,000
December	18,000	570,000

 

Under the high-low method, variable cost per unit is:                                                               

$15.83

$13.75

$23.44

$27.50