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  • Apr 6, 2009, 12:23 PM
    monte1012
    High Low method
    High Low method of accounting
  • Apr 6, 2009, 11:38 PM
    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

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