Handy hiking produces backpacks. in 2007, its highest and lowest production levels occurred in july and january, respectively. in july, it produced 4,000 backpacks at a total cost of $110,000. in january, it produced 2,500 backpacks at a total cost of $87,500. using the high/low method, the average variable cost of producing a backpack was:

The average variable cost of producing a backpack is $15.

The formula for calculating the variable cost per unit using the high/low method is:

where

y₂  : cost at highest level of activity

y₁  : cost at lowest level of activity

x₂  : number of units produced at highest level of activity

x₁  : number of units produced at lowest level of activity

Substituting the values from the question in the formula we get,

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