Frank Company operates a cafeteria for its employees. The number of meals served

Question

Frank Company operates a cafeteria for its employees. The number of meals served each week over the last seven weeks, along with the total costs of operating the cafeteria are given below: Meals served Cafeteria costs Week 1 1,500 $4,800 Week 2 1,600 $5,080 Week 3 1,800 $5,280 Week 4 1,450 $4,900 Week 5 1,200 $4,000 Week 6 1,650 $5,100 Week 7 1,900 $5,400 Assume that the relevant range includes all of the activity levels mentioned in this problem. 2) Using the high-low method of analysis, the variable cost per meal served in the cafeteria would be estimated to be: A) $1.50 B) $2.00 C) $2.80 D) $1.00

Explanation / Answer

the variable cost per meal served=high cost-low cost/high meals-low meals servrd=5,400-4,000/1,900-1,200=$2.00 per unit

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