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-   -   How to calculate high-low method (https://www.askmehelpdesk.com/showthread.php?t=269103)

  • Oct 13, 2008, 10:09 PM
    suda19
    How to calculate high-low method
    To calculate high-low method, give example
  • Oct 14, 2008, 01:49 AM
    hamzashakaa

    High low method is used to separate fixed from variable costs.

    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 hifhest or lowest level of activity. Lets multiply it by the highest level of activity (0.07*2000000)=140000 and deduct the amount from the highest cost (150000-140000)=10000 so the fixed cost is 10000
  • Feb 18, 2011, 10:50 AM
    usmanaziz1
    basically in a much simple way :

    output - 400
    900

    total cost - 1050 (for 400 units)
    2300 (for 900 units)

    what is total cost for 850 units?

    a. 2300-1050= 1250 , 900-400= 500

    b. 1250
    ---- = £2.50 / unit
    500

    c. calculate fixed cost, using high set of data

    FC = 2300
    VC= 900*£2.50 = (2250)... minus this figure from FC

    = 50

    d. TC = 50
    + VC = 850*£2.50 = 2125

    total cost of 850 units = 2125 + 50 = 2175.
    simple.

  • Feb 9, 2012, 12:15 AM
    Fikru
    High-low
    18750 16500
    30000 12000
    Find
    Develop formula
    Fixed because
  • Mar 4, 2012, 01:53 PM
    Bexx1
    What if the fixed cost ends up being a minus figure, what does that mean?
  • Mar 19, 2012, 03:24 AM
    hottmann4
    1. Wood used in the production of furniture. Variable.
    2. Fuel used in delivery trucks. Variable.
    3. Straight-line depreciation on factory building. Fixed.
    4. Screws used in the production of furniture. Variable.
    5. Sales staff salaries. Fixed.
    6. Sales commissions. Variable.
    7. Property taxes. Fixed.
    8. Insurance on buildings. Fixed.
    9. Hourly wages of furniture craftsmen. Variable.
    10. Salaries of factory supervisors. Fixed.
    11. Utilities expense. Mixed.
    12. Telephone bill. Mixed.

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