[lunganim]

Hi

My question is in calculating the High-Low Method, is it a must that you start by getting the variable cost or sometimes the information can lead you to start by getting the fixed cost and then get the variable cost??

[morgaine300]

You absolutely must start with variable. There isn't any way to get fixed out of this method except by getting variable first. The whole point of this method is to watch how costs change as production changes, and by definition, only variable costs can change.

See here for a couple of different ways to solve these:
https://www.askmehelpdesk.com/accoun...od-223233.html

[hamzashakaa]

See also this example:

Example:

Suppose you have two levels of activities and costs as follows:

Activity (Machine hours) Total Cost

1,000,000 $80,000
2,000,000 $150,000

Variable cost per unit= Difference between the highest cost and the lowest cost divided by the difference in the highest level of activity and the lowest level
(150000-80000)/(2000000-1000000)=0.07
multiply the rate by the highest or lowest level of activity. Lets multiply it by the highest level of activity (0.07*2000000)=140000 and then deduct the amount from the highest cost (150000-140000)=10000 so the fixed cost is 10000