High Low Method involving Sales and Advertising Expense
Hello I am trying to determine how to split up a mixed advertising expense on a Selling and administrative budget for the months of sept. and October. The company uses the high low method to determine the variable rate and fixed portion. The company has a beginning balance in the advertising payable from August of 61,250, and the company pays all advertising expenses in the month after it is incurred. The numbers are:
Sales Advertising Expense
High Month: 900,000 75,000
Low Month 300,000 45,000
the method : 75,000 - 45,000 /
900,000 - 300,000 = .05
so .05*900,000 = 45,000
75,000 - 45,000 = 30,000 (fixed cost)
is this correct so far?
If so, do I use the variable rate for the 61,250 from the ad payable?